Energy woes: assessment by Nepra

While the government is busy in positioning itself fairly and squarely to have an advantage in the general election, country's economy is bleeding profusely mainly due to severe energy shortages. According to a report compiled by the National Electric Power Regulatory Authority (Nepra), the country is losing up to 3 percent of its GDP because of power shortages which may increase if the present trend persists.
The energy crisis continues to aggravate due to a number of factors, including a lack of integrated energy planning and demand forecasting; an imbalanced energy mix with a heavy reliance on oil imports; non-utilisation of vast indigenous resources such as coal and hydel; a profound lack of effective structuring, planning and implementation of viable projects. Many power plants in Pakistan are generating electricity at half of their capacity because of fuel-related issues leading to an average power shortfall of over 5,000 megawatts. Violent protests over power cuts have become a routine exercise. Unpredictable outages, in particular, have adversely affected industrial output because of which exports have suffered. The situation, therefore, has led to shrinking job opportunities for growing population of a country.
Giving background of the crisis, Nepra's report highlighted that over the past five years, natural gas allocation for the power sector was reduced and the use of furnace oil increased considerably for power generation, forcing the country to spend billions of dollars on the import of crude oil and petroleum products. Power sector was also afflicted by corruption and inefficiency. This had increased the cost of generation, worsened the circular debt issue and led to higher power rates for consumers. The situation had aggravated to an extent in Pepco that survival of Gencos, NTDC and Discos was at stake. OMCs and gas supplying companies are not getting their due payments while IPPs are frequently seeking to invoke guarantees to force the government to fulfil its obligations. All these factors have led to a situation where it is virtually impossible to attract new investment.
In our view, there could be hardly any argument about the accuracy or objectivity of Nepra's report. A host of adverse developments including deteriorating generation and fuel mix, power theft on a vast scale, billing inefficiencies, corruption and ever-increasing circular debt have led to a situation where the supply of electricity is much lower than its demand and public is being forced to stay without electricity for more than 9-12 hours in most cities and around 16-18 hours a day in many rural areas. The deepening power crisis has forced many businesses to close down and terminate the services of their labour force. In short, every segment of society is bearing the brunt of energy shortages and the resultant crisis would not remain limited only to huge losses to economy but could also tear apart the social fabric of society. In order to reverse the trend of deepening crisis, several measures are needed to be put in place without losing more time. In particular, generation mix has to be changed drastically, circular debt eliminated, power tariff enhanced to equalise the revenues of power producers to their generation cost and line losses reduced to international standards by eliminating theft and checking corruption. The contribution of hydel energy which was around 65 percent in the overall energy mix has declined to around 29.5 percent, rendering the price of electricity almost unaffordable and jeopardising the competitiveness of country's industry in the international market. Natural gas has increasingly become a scarce resource and its allocation to the power sector has declined to dangerous levels, widening the gulf between installed generation capacity and actual production. Circular debt is ballooning due to a serious lack of fiscal space and government's inability to implement harsh decisions. Line losses are not only excessive but, according to some latest reports, are also under-reported to hide more dangerous situation. All these problem areas need a thorough analysis and are crying for appropriate remedies but nobody seems to be listening and taking appropriate decisions. Whenever there are disturbances in a certain city and situation becomes unmanageable, demand is managed in a way so as to calm the situation for a few days. The nation has been told about the utility of TAPI and Iran Gasline projects and the government's efforts in this connection for such a long time, still nobody believes in their actual implementation anymore. In the meantime, the country continues to suffer immensely. The report goes to speak for a growing sense of despondency among people. Of course, Nepra's report has highlighted major issues of the power sector and deserves very high marks for its objective analysis of the energy situation, but ordinary persons may be advised to banish the thought that government would become serious about the matter and do something really concrete to address the problem on a lasting basis. Sometimes, it seems that the government is more interested in its survival and cares least for such "minor problems" appearing regularly on its radar to distract its attention!