PAST & PRESENT OF ENERGY SECTOR

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)

Mar 26 - Apr 1, 20
12

Energy crisis in Pakistan is not a new phenomenon. It has reached to the current level after decades of underinvestment, mismanagement, bad governance, apathy, and political biasness. Four years back, the situation was not inasmuch critical, as it is toady when gas shortages causing massive shutdowns of industrial units have become commonplace, electricity deficit has touched the dangerous mark of 6,000 to 7,000 megawatts, and when frequent rises in energy tariffs are rendering the local products uncompetitive in international market besides eating into a major portion of monthly income of common person. Naturally, the impact of deterioration is quite visible while the process of it is often overlooked.

The present government is bound to answer the people what it has done to contain the deterioration. What has appeared on ground is plainly indicative of the government's inability to stop this process and rather its role in catalysing it to the degree that energy crisis held back economic growth by two per cent in just couple of years.

The revelations made in the Pakistan Energy Yearbook 2011 released by the hydrocarbon development institute of Pakistan (HDIP) recently were startling. While share of oil in energy mix is increasing year over year, gas is losing its position as the primary energy source, according to its statistics. Gas accounted for 50.3 per cent in total energy mix in 2005-06. By 2010-11, the percentage share decreased to 47.6 per cent, indicating annual cumulative growth rate of one per cent during last six years in contrast to oil that saw an average growth rate of 4.7 per cent from 28.1 per cent in 2005-06 to 32 per cent in 2010-11.

Similarly, annual energy consumption was recorded at 38.8 million tonnes of oil equivalent (TOE). Major energy consumer was industrial sector energy consumption in which was 15 million TOE. Average consumption growth rate in this sector was registered at not more than 0.4 per cent in the periods under review lowest compared with that of domestic, commercial, agriculture, transport, etc. The slowly increasing rate also implies the trend of overall industrial growth including expansion. Even the addition of 2.2 per cent in energy supplies in 2011 failed to reduce the wide demand-supply gap, said the yearbook.

Transformation in energy mix that is mainly ever-increasing reliance over oil is exerting burden on balance of payments. Over 80 per cent of national oil requirements are met through importation. Consequently, oil import bill is consistently swelling. The country imported $12.3 billion in 2010-11 accounting for 34 per cent in total import bill of $35.8 billion. Imports of petroleum products rose 14.4 per cent year on year during the first half of current fiscal year, according to a recently released report of state bank of Pakistan. The electricity generation in the six months scaled up 3.2 per cent while natural gas production increased 22.5 per cent.

In spite of apparent recovery in production side, energy sector could not perform well due to the growing demand, it said. Gas and electricity shortages are escalating. In the first half, interruptions in gas supplies to CNG stations and industries were pushed up critically compared with the same period a year ago, it added.

An investment of Rs115 billion (including Rs32.5 billion budgetary allocation) was proposed in the budget 2011/12 for power generation, distribution and conservation. Rs18 billion was earmarked for Basha Diamer dam. In addition, Pakistan Atomic Energy Commission was allocated Rs22 billion for increasing power generation from nuclear energy sources. Non-release and misappropriation of funds often do not let the investments come to fruition.

According to the analysts, the investments are not sufficient to overcome the growing electricity and gas shortages. Funds are needed to give a facelift to all the aspects of electricity sector from generation and distribution to transmission.

Experts called for practical measures to revamp the energy sector, and investments in alternative energy sources including wind and solar to eliminate shortages of electricity and abandon reliance over hydrocarbon sources for power generation.

In a broader dimension, the efforts should be linked to population control initiatives, energy conservations, and reorganization of energy sector. Unquestionably, energy consumption is increasing at a faster pace, outpacing economic growth rate, because of abnormal rise in population and unplanned urbanization.

At the time of partition, Pakistan's population was about 31 million and per capita power consumption was not more than five units. It was not until 1959 that generation capacity was enhanced to 119 megawatts. In next five years, electricity generation was to reach over 600 megawatts to meet the requirements of industrialization and infrastructure developments. By 1970, establishment of hydropower and thermal power plants added 700 megawatts to the national grid.

Supply constraint-driven electricity load shedding took place first time perhaps in the 1990 when shortfall was revolving around 2,000 megawatts despite the fact that power generation at that time stood at 7,000 megawatts. Analysts said generation was not inasmuch fast as demand growth was at that time. Growing at a nine per cent rate per annum, demand was in fact significant. It is said 1994 power policy proved effective in reducing demand-supply gap by opening up a floodgate of private investments in the cash-strapped power sector. The policy encouraged only thermal generation while other sources were kept uncared for.

Over the years, successive governments did not pay attention to the alternative sources of energy. Despite having huge potential, even hydropower sources have yet to be exploited to its fullest. Thermal sources happen to be cost effective. Existing gas supply is insufficient. Oil is also an uneconomic option.

People should be motivated to conserve energy as much as possible. Religious leaders should be asked to promote energy saving and discourage power thefts at local level. Private ownerships in the energy sector should be encouraged as they can eradicate corruption and resource misappropriations.