In search of reasonable thinking

Benjamin Franklin said, “Common sense is something that everyone needs, few have, and none think they lack.”

This is a great quotation that sums up our national dilemma. We face existential challenges on the economic front and are experiencing almost unsurmountable problems in the power and energy sectors. Many problems that we have created ourselves have outgrown to a size where handling them looks almost impossible.

To name a few, overall debt burden on the economy, circular debt, lack of adequate tax base, unskilled and superficially educated young generation. This list can go on further, but these problems are part of our common drawing room discourse at the national level.

What we will find talking about soon will be problems related to water-scarcity and issues of food security.

So, the list of our problems is going to be further enhanced due to the lack of appropriate and timely decision making and policy action.

When we read the papers or look at social media, we find that very competent people have put their minds to these problems, tried to enumerate them and give solutions but there appears to be no progress in the right direction.

The problem is not about identifying the issues or even enumerating the solutions, it is about the will to make the right decisions and the sincerity to follow through on them.

What is the relationship of common sense? It is about learning to understand that if we waste our water resources and do nothing to conserve and add new reservoirs, we will soon find ourselves in a fix. We are already a water-stressed country and it is a few years from now that we will become a water scarce country.

According to the Institute of World Resources, Pakistan ranks 14th among the 17 ‘extremely high baseline water stress’ countries of the world.

According to a report by PIDE, Pakistan wastes one-third of the water available and that water availability in Pakistan has plummeted from 5,229 cubic meters per inhabitant in 1962 to just 1,187 in 2017. So, we started as a resource rich country with respect to water and now our availability of water has gone down almost 5 times. What a great indicator of failure of common sense at the national level.

We have been boasting about our agriculture, but our common sense never prevailed in telling us that without adopting modern techniques our productivity will go far below the global average and we will not be able to feed ourselves.

To put things in perspective Pakistan produces almost one- third of wheat per hector as compared to global best productivity yields. This is just around 3.1 tons of wheat from one hectare, as compared to 8.1 tons produced in France.

Similarly, Pakistan produces about 50% less cotton per hectare, as compared to what is produced in China. We produce almost half the yield of sugarcane per hectare as compared to Egypt. The numbers would show similar pattern when we look at maize, rice or other crops.

Where we produce anything of value, unfortunately we don’t have appropriate supply chain, e.g. fruits, it is the unavailability of cold chain to store, transport and export it to bring any value to the economy.

Let’s talk about energy security and affordability, unfortunately we have made such a mess of this whole sector that it might take decades before things are put right. If we want to go for cheap electricity, the cheapest form of energy is the one that is not used. Conservation of power and fuel must have been a cornerstone of our policymaking in the past, yet it is not even now appearing as a meaningful agenda item at the top for our policy makers. Our building codes do not sufficiently focus on conservation of energy and as our energy utilization is the highest in the domestic sector, so any meaningful reduction there can have an impact on our fuel import bill and hence foreign exchange requirements.

Another sore issue is circular debt of energy that has ballooned to more than five trillion rupees, it has become a jinn that is refusing to go back into the bottle. Our wrong policymaking laced by our desire to appease and loot both, appease the masses when that matters and loot by the elite till the time they can do it, has brought us here. Now every day a new solution is either proposed or a new approach to salvation is identified. Today we will not dwell much on circular debt, but common sense says that if we use power without paying the actual cost of producing it, someone needs to foot the bill. If the government keeps on taking up the difference through subsidies or free units or payment guarantees, this is just a Ponzi scheme that will collapse one day. Unfortunately, that time has come where the burden has become too large to hide anywhere. It doesn’t need any professionalism to understand that if we keep on taking paracetamol for fever without administering medicine for the underlying disease, it doesn’t help much in most cases.

Someone asked me how to bring down the cost of electricity for the consumers. My answer was to investigate what constitutes the cost of electricity for the consumers. According to fair estimates, the cost of electricity constitutes one-third the actual cost of producing it, one third attributable to line losses and theft and one-third for the capacity charge that is there because generation capacity cannot be utilized due to various factors, including low demand, lack of foreign exchange for fuel or inability of transmission lines to transport power, etc. From this point on it is just common sense to understand where we must be focusing our efforts to bring down the cost to consumers. As it was not the intention of today’s discussion to find a solution to this problem so we would stop here but it is pertinent to point out that one of the solutions that has been peddled innumerable times to re-negotiate signed sovereign contracts to solve this problem is totally opposite to common sense, if this solution is analyzed properly we would understand that it will harm the economy and future investments in any sector in the long run whereas it will create miniscule impact in the cost of electricity to the consumers. Common sense demands that we decrease the losses and theft to minimum, increase investment in transmission as that is a bottleneck for utilization of power that gives rise to capacity charge payments and support the growth of industry to use that excess generation capacity that has already been installed.

But above all isn’t it common sense to stop investing in power generation now and start investing in transmission and distribution assets?

An old saying that always resonates in my mind is: “When you find yourself in a hole stop digging.” If we need to resolve our problems we have to think out of the box and understand that our old ways of policymaking have failed us.

Copyright Business Recorder, 2024