Power shortage has become acute again with a daily shortfall of over 5400 MW or able to meet only 65 percent of demand accounting for loadshedding of between 12 to 13 hours in villages and around 7 to 8 hours in cities. To add insult to injury, the day after this information was made public the National Electric Power Regulatory Authority (Nepra) approved a whopping Rs 6.39 per unit increase in power tariff of distribution companies (Discos) under the fuel adjustment price formula for the past four months. The economic fallout of the continued energy shortfall is for industrial/agricultural production well below capacity and layoffs leading to many of those gainfully employed compelled to join the ranks of the vulnerable while not qualifying for the Benazir Income Support Programme (the government's flagship programme to fight poverty). Unemployment, research has shown, increases the crime rate in a country and has the potential of leading to civil unrest. Additionally research studies around the world, including Pakistan, indicate that there is a direct linkage between a country's energy demand and the achievement of Millennium Development Goals that include eradicating extreme hunger and poverty, achieving universal primary education, reducing child mortality, and developing global partnerships for development. Thus the negative socio-economic consequences of an energy shortfall are significant, not only from the point of view of households but also from the perspective of the productive sectors as well as the political leadership. The critical question remains as to why the government has not taken measures to deal with this issue more effectively for the past four years. The government's argument that the Musharraf government is to blame for failing to add to supply, given the escalating demand that was forecast at the time has merit. The government of Pakistan had undertaken a study in 2005 to determine by how much energy supply must increase to support different annual economic growth rates. It concluded that to maintain growth rates in the 7-8% range, energy supplies by 2010 would have needed to increase by 40-46% or grow to around 79 MTOE (MTOE = million tons of oil equivalent). By 2015, energy supplies would need to increase by 96-115% to around 120 MTOE. These estimates were compared to the 2005-06 energy supplies of 57.8 MTOE thereby implying a significant need for additional energy supplies to keep up with and support Pakistan's economic growth. This was not undertaken during the Musharraf era and disturbingly four years of the PPP government reveals that this objective has not been proactively pursued. The question is why? Hydel generation remains subject to cyclical changes based on weather conditions as well as on India's violation of the Indus Water Treaty through building dams. Domestically extracted gas shortages are rising impacting on among others, fertilizer output that, in turn, accounts for either importing expensive fertilizer from abroad or else reducing its usage domestically, thereby negatively impacting on farm output. Imports of necessary fuels including crude and refined oil as well as furnace oil compel the government to set domestic prices based on the international price - a policy that is economically feasible but politically disastrous during times of escalating international oil prices. Subsidies have been extended to equalize the inter-disco tariff differential which implies rewarding the less-efficient discos over the more efficient ones. By far, the biggest contributor to continued energy shortage over the past four years is however the inter-circular debt that continues to compromise PSO's ability to pay for critical fuel imports. Recently the government, once again, compelled banks to restore credit limits of Hubco, Kapco and IPPs but this was a short-term measure at best as the circular debt remains in excess of 300 billion rupees and did not include furnace oil-fired power generation. A USAID 2007 study proposed dealing with two major challenges as a means to overcome our energy crisis, namely (a) aligning economic incentives through policies, regulations, subsidies, tariffs, prices, collections, and taxes to improve fiscal discipline and transparency, attract investment, and encourage energy conservation and efficiency improvements; and (b) creating sufficient capacity to empower stakeholders such as the Government of Pakistan and the private sector to implement and respond to the incentives framework. The study argued that the private sector lacks skills to analyse what is the most efficient captive power system to purchase and operate, as well as lacks the knowledge to explore options under existing government policies to sell captive power back to the utility (net metering) or to invest in power generation facilities such as small hydro or wind facilities that could produce power that the local utility would transmit to industrial use. The prescriptions are available to the government and have been available for the past decade at least however unfortunately the political will to implement them is lacking.
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