Muslim Commercial Bank, Lahore

June 11 - 17, 2007

Pakistan is in the midst of a very severe power crisis. In the opinion of some energy analysts, it has the worst energy infrastructure in Asia. This insufficiency is the biggest risk to the long-term sustained economic development of the country. The crisis has basically stemmed from poor planning, terrible forecasting, economic development with addressing key fundamental issues, poor governance and existence of a number of political issues in the power sector. In order to overcome the energy problem the government of Pakistan established a National Power Regulatory Authority (NPRA) in 1997. The main task of NPRA was the privatization of the power sector. This policy started to be followed in 2002 with an ultimate objective of providing incentives to overseas investors to encourage investment in the sector. The policies, while attractive in paper, have not yielded the results expected with much talk of a lack of transparency, deliberate attempts to slow the privatization procedures and increased security issues.

Although the government has no option except to support competition and instigate privatization in the power sector, these options have their own side effects. The results of the privatization of Karachi's energy-transmission network have presented unforeseen problems. The company concerned, Karachi Electricity Supply Co (KESC), announced that it will be three years before new generators come online because of years of under funding and the poor state of the infrastructure, providing little relief to angry residents who had been expecting swifter redress under new management. Furthermore, the shift of management from military to KESC has highlighted very serious unexpected side-effetcs in Karachi the, the most prominent of which is the rapid rise in the incidences of power theft. Still, over the longer term, the private sector is regarded as the way to go, most effectively and efficiently matching supply with demand.


The ability to generate power from the resources in the country was considerably enhanced during the nineties but no major action in this regard has been taken by the present government setup since its inception from the year 2000. From the beginning of nineties till the end of that decade the power generation ability was almost doubled and also considerable steps taken to reduce the line losses up to 19%. Electricity theft rose to 30% during the period after the year 2000 over and above the damages the people of the Karachi and the Industries working at Karachi started to pay. Keeping in view the efforts in the past to bring the private investments in the Power sector at high prices have already effected the export potential of the country due to increased cost of production, the policy of the government to drag itself out of the energy sector is understandable.

Impact of Power Sector Crisis on Balance of Payment Position: The crisis is making the current account deficit worst because it is pertinent to note that Pakistan imported oil of almost US$ 6 billion during the last year to meet the shortage of energy and the figure is expected to raise more due to the expected rise in oil prices. If so, it will have an extremely negative effect on the current account deficit making the deficit almost US$ 3 billion higher compared to its current situation, without considering any other aspect of the Current Account.

The following sources of energy under the present government set-up may be considered to make any concrete move to cater the energy crisis:

The Non Feasibility of Bhasha Dam Project: There are serious issues regarding the Bhasha Dam project in view of its location in a highly seismic region.

Significance of Kalabagh Dam: The Kalabagh Dam on paper is an extremely viable project but is marred with massive political considerations. An ex-Chairman of Wapda even explained the political scenes behind it in the following words: I recall the comments made to me after a detailed presentation regarding Kalabagh by a senior member of that party. 'General', she said, "what you are saying makes a lot of sense but agreeing to start this project will be our political death".

The Capacity Analysis of Power Sector: The installed capacity to generate power in the country is about 19,500 MW with the expected annual rise of about 10%. The country has the potential of producing almost 40000 MW of hydro power and it is producing only 6000MW. Therefore the focus of the government should be on increased the hydro power because it is an environment friendly and cheapest source.

Coal as the resource of input for the Power Generation: Another solution to the problem is coal based power plants. According to an estimate we are sitting on an approximate 185 billion tons of coal that are considered as the second largest in the world. While the power projects based on coal with the power generation ability of approximately 1.5 Million MW are under construction around the world at the same time we do not have any! Therefore there is need to put emphasis on this source as well.

Nuclear Power as a source of Energy: Pakistan is also trying to develop its resources of nuclear energy as well with the help of China but these are so meager to be considered as a proper source of energy for general utility. Although Pakistan has great resources of uranium 308 the required input of nuclear energy but still due to the International sanctions on the transfer of nuclear technology, sourcing sufficient quantities may plague attempts to develop this sector.