ENERGY CRISIS: REALITY OR MYTH
Feb 02 - 08, 2009
Pakistan's economy has shown an 8.6% GDP growth during 2004-05, which is the highest in the history of 61 years of Pakistan, and that fiscal year was among few golden years when economy grew about 7% YoY. For the coming years, government was targeting growth rate of about 6% and with this sustainable increasing growth energy consumption was also increasing. The country plunged into energy crisis by year 2007 mainly due to rising electricity demand followed by surge in sale of electricity and electronic appliances on lease finance.
The total installed generation capacity has increased to 19566 MW during July-March 2007-08 from 19440 MW during the same period last year, showing a marginal increase. Total installed capacity of Wapda stood at 11654 MW during July-March 2007-08 of which, Hydel accounted for 55.6% or 6474 MW, thermal accounted for 44.4% or 6477 MW. The number of villages electrified increased to 126296 by March 2008 from 113605 as compared to last year modest increase of 11%.
The household sector has been the largest consumer of electricity accounting for 44.2% of overall electricity consumption followed by the industrial sector 32%, agriculture 14%, and the commercial sector 6%. According to State bank of Pakistan, the industrial production especially of Large Scale manufacturing (LSM) will continue to decline during 2008-09, registering a negative growth of 6.2% in first half. Severe energy crisis is one of the key reasons of this problem. The decline in LSM production is broad based. Seven sub-sectors (having 72% weightage) out of 15 registered a downward trend in production, while three (having 15.3% weightage) grew less than 1 %.
On the other hand, knitwear export orders fell 50% due to mostly high cost of Pakistani clothing in the time of global recession. Industrialists in Pakistan believe that this global recession offered new doors of opportunity for increasing exports but it all finished because of flawed government policies and broken promises.
The country is facing a shortfall of 4500 MW. Presently supply of gas is suspended or interrupted to most of the industrial sectors across the country. Out of 400 textile mills 150 are reportedly closed and in Faisalabad alone 150,000 power looms have been shut down.
Hidden reason of prolonged power outage is that independent power producers (IPPs) have suspended electricity supply because of running out of oil reserves. The reason of stopping power production is the non-payment to these IPPs. Former Chief Minister of NWFP and former Chairman Wapda said, "There is no electricity shortage in the country and the present crisis is the result of non-payment to the IPPs". He was addressing to a seminar on "Electric Power Stability & Requirements of large dams".
The increasing gap between electricity supply and demand could derail the efforts of previous government economic reforms and progress. Pakistan faced electricity deficit from 1990 to 1997. From 1997, the generation capacity increased and it was expected that the supply and demand would remain in equilibrium till 2010 but massive growth of economy created room for acute shortage.
Zubair Ahmed Malik, former Vice-President FPCCI said power cuts affected production and caused financial losses. Representatives of LCCI said government must supply power on sustainable basis to industries so that industrial wheel kept on moving. 70% industry of the country has been closed mainly because of crisis of electricity and gas. The credit of this devastation goes to mismanagement on the part of the government. Now government should formulate comprehensive strategy to end this unrest as soon as possible. Due to poor government policies, businessmen could not pay back their loans, wages to workers because of no production inside factories.
Advisor on finance to PM Shaukat Tarin has said that an integrated energy policy will be made to end severe energy crisis. The distribution of available energy and subsidy will be a major component of this policy. "If we look back on the past investment, more than $6.5 billion was invested on arranging for 5728 MW of power during 1994-1996. No visible investments were made in the sector since then while demand was growing at 12-14% per year," he added.
In current winter, we have a shortfall of 4500 MW, which can be easily made up by IPPs if government would agree to pay back the circular debt of Rs.400 billion. Some public organizations and industries are also not making payment and in response the IPPs are not working at optimum level. It is interesting to note that 16 IPPs with an installed capacity of 6500MW are currently providing only 4400 MW. These IPPs can resume 1500 MW after payment of Rs.15B under directions of president.
On medium term measures, government is planning to add 502 MW of hydropower by 2011 and 20 IPPs to generate total capacity of 4600 MW till 2012. Government has to pay full attention to other factors like heavy losses in distribution, theft, and inefficient use of energy by industry and domestic users. Public awareness should be promoted regarding efficient use of electricity.
For long-term, resources of coal, hydropower and renewable resources of wind and solar energy should be exploited. Pakistan has huge hydropower potential of around 4000 MW that remains untapped fully. Wind energy alone has a potential of 50,000 MW with an estimated investment of $30 billion. Coal deposits in Thar are one of the largest reserves in the whole world.
Energy is prerequisite for economic development. Current energy crisis in the country shows that without proper diversified use of resources, it is absolutely impossible to sustain the growth and feed on population of 170 million which is increasing at a rapid growth rate of 2.5% per annum. In order to tackle the current situation, domestic energy resources must be utilized with heavy investment on infrastructure so that upcoming generations will have higher standard of living.