POWER CRISIS ASSUMING THREATENING PROPORTIONS

SHAMSUL GHANI (shams_ghani@hotmail.com)
Feb 02 - 08, 2009

The statement of federal minister for power to permanently get rid of the energy crisis problem by December 2009 is obviously aimed at buying some time for the struggling new democratic setup that has so far relied on blaming the previous government for the mess on the energy front. Knowing well that such argument works only for a limited period of time and one has to get on with the job at some point in time, the government has shifted the focus from the previous government's failure to the future promises. In countries like Pakistan, the problem with the democracy is that much of the leaders' time is taken away by political activities and little is left for doing something of substance. These activities include toeing the party line, thrashing the opposition, criticizing the previous setup and making hefty promises for public consumption. Like Mr. Shaukat Tareen, who has resolved the paralyzing external liquidity problem within the shortest possible time, perhaps the PM needs another advisor who could take up the power crisis issue with the seriousness it deserves. The lack of a sense of urgency to attend to the gnawing problem is really disturbing. Apart from the social upheaval and public hysterics this monster has brought with it, the nose-diving economic activities portend greater danger for a country already under severe economic and financial stress.

The ongoing work on 9,000 MW power projects may augur well for the distant future, but the present state of affairs is by no means bright, to say the least. As against a demand of 10,500 MW, the country is producing only 4,500 MW. The reasons offered are falling water levels in the dams and shortage of furnace oil. In the face of historically low oil prices, the shortage of furnace oil is somewhat enigmatic. The actual reason behind the mismatch between demand and supply is the Rs.400 billion circular debt which has prompted eleven power producing companies to shut their production. This monstrous debt has accumulated from the previous and present governments' failure to bluntly settle issues with the oil marketing and refining companies who have been overcharging the nation since long, under different pretexts. Besides 18-hour a day load shedding in rural areas, the power shortage has crippled the economy of Karachi and other industrial cities of the country that require an immediate scaling up of power supply to keep the wheel of economy from going to a grinding halt.

Country's installed capacity is 20,000 MW which can be made to operate at 75 to 90 per cent levels. And that is much more than what we presently need. Unfortunately, every Tom, Dick and Harry, while sitting at some TV reality show, blames the previous government for, according to his very limited knowledge, failing to add a single mega watt during its tenure. Out of their bias for the previous government, even the knowledgeable withhold the fact that till 2005, we were surplus on power generation and that thereafter projects for 3000-3500 mega watts were launched. The need for long term planning notwithstanding, our present problems are of short term nature that call for upgrading of production, transmission and distribution capabilities coupled with the optimum utilization of existing capacity. The circular debt problem that hinders the maximum generation needs a financial solution rather than any rocket-science knowledge. The overhauling of faulty transmission and distribution systems responsible for huge outages is also an investment issue and is to be solved through funds injection. Theft control and non-payment of bills are administrative issues and can be solved accordingly. So, it is the upgrading of energy supply system and security that can take us out of the "current crisis."

What is more disturbing is government's continuous endeavor to jack up the energy prices just to boost the revenue, without realizing the deadly impact of such foolish moves on business, industry and the economy. Another problem with the democratic setups is that most of the leading political parties have roots in the feudal system and they tend to avoid the taxing of affluent and resourceful sectors of economy. They simply adhere to the policy of milking the masses instead of making genuine efforts to broaden the tax base. In the absence of any long term fiscal planning, the economy frequently goes through external account shocks. This leads the country to the doorsteps of international lending agencies which blindly impose their conditionalities including the withdrawal of subsidies from such important sectors as energy and agriculture giving rise to food and non-food inflation. Higher energy prices hit the business and industry. In the current global crisis situation, the continuous rise in energy prices is having a killing effect on the economy.

High energy costs coupled with the high interest rates have caused incalculable harm to business and industry. The most hit sectors are automobile and textile that are reeling under the pressure of falling demands and cost / supply crises of power and gas. The ever rising cost of doing business and the faltering global demands are going to hit the Pakistani exports to push the economy to the vicious cycle of huge current account deficit, more international debt, jacked up policy rate, higher domestic inflation and finally still higher cost of doing business. In the wake of the blindfold increase in power and gas tariff, the business and industry outlook for 2009 appears quite gloomy. The situation is not likely to improve unless power / gas tariff and interest rates are brought down to a realistic level.

Apart from triggering economic turmoil, the power crisis has also caused social sector woes. The massive job cuts on the industrial front have jolted the already worsening job market. In Karachi alone, the industrial area retrenchments have accounted for 250,000 jobs during the last six months. The job losers are mostly the contract employees and the daily wagers. The social impact of such mass-scale layoffs is very huge. The national newspapers are regularly reporting the unfortunate incidents of individual and collective suicides (even the heinous killings of own family members by the family head). These are the signs of a fast degenerating society. The government functionaries must divert their attention to this socio-economic dilemma before it is too late.