Implications of Pakistan�s Power Crisis

Despite additional power generation capacity having been created, Pakistan’s power generation has not gone up. Shortages have been rising since 2007 and have now crossed the 7000 MW mark. Traditionally Pakistan has enjoyed the fruits of cheap hydro-power primarily on account of electricity generated from its mega dams.  However, for last few decades no new mega dams have been built. A proposed dam on the River Indus at Kalabagh in the Mianwali District of Punjab Province, though technically the most viable location for such a venture has been embroiled in inter-provincial discord. This project has generated so much of heat that despite strong support from Punjab, the other three provinces have passed legislative resolutions against its construction.  Consequently, Pakistan has opted to go in for the Diamer-Bhasha Dam in occupied Gilgit-Baltistan, a region that is seismically quite active. The foundation stone for this over 11 billion dollar project was laid on 18 Oct 2011. Recently the World Bank and the Asian Development Bank (ADB) have agreed to fund the project whose estimated time for completion is 12 years. The dam will submerge parts of Karakoram Highway and many prehistoric, ancient and rather spectacular rock carvings that are spread across the vast basin. However, submergence of territory in Pakistan Occupied Kashmir (POK) to generate electricity for Pakistan does not cause concern in Pakistan.

 

The existing dams at Mangla and Tarbela are primarily storage dams meant to provide water for irrigating fields and the power generated is just an incidental benefit.  In recent times the government has been forced to release water from the dams to improve the precarious power situation, but this could have a catastrophic impact on the agriculture during next sowing season and impact the food security.

 

Consequently, Pakistan has been relying more and more on thermal power plants to meet the growing demand for electricity.  Currently, 36 per cent of Pakistan’s electricity is produced from oil, another 36 per cent from hydropower, a quarter from gas and just three per cent from nuclear reactors.  This makes the cost of power generation directly dependent on the price of oil and gas.  Most of these oil and gas based plants are in the private sector and are called Independent Power Producers (IPPs). Many of these plants are shut or not producing power up to their optimum capacity due to the problem of ‘Circular Debt’.

 

As the natural gas is also used to keep the kitchen fires burning, political compulsions force the government to accord priority to domestic consumers over industrial consumers and power plants.  Most of the IPPs therefore generate electricity using Furnace Fuel Oil (FFO) and supply it to Pakistan Electric Power Company (PEPCO), which distributes power to other downstream users. Over the years PEPCO has not been able to pay the IPPs for the power supplied, because firstly, it has not been able to receive its dues from consumers and secondly, the tariffs were not sufficient to make good the cost of power purchased.  The average crude price has remained fairly high during the last nine months and has consequently increased the generation cost.  As the IPPs are unable to recover their cost of production, they are not in a position to pay Pakistan State Oil (PSO) its dues of over Rs 200 billion.  PSO in turn purchases oil from the refineries and owes Rs 85 Billion to the five refineries, namely, Pak Arab Refinery (PARCO), Pakistan Refinery (PRL), National Refinery (NRL), Attock Refinery (ARL), and Byco.  Consequently, the refineries have defaulted in their payments to Oil and Gas Development Corporation (OGDC) and Pakistan Petroleum Limited (PPL) that provide them crude oil. OGDL and PPL have liquidity crunch of their own and have inadequate cash reserves to import crude and supply it to the refineries. As a result, in spite of increased capacities totaling 19505 MW, the power generated continues to languish around 7000 MW, with most IPPs operating at quarter of their capacity.

 

Absence of power has led to water shortages as pumps cannot be operated.  Power cuts coupled with shortage of piped gas have forced many households in urban Punjab to resort to firewood to keep the kitchen fires burning.  To aggravate matters, with the rising population and soaring temperatures, the demand has been rising consistently, and both Tarbela and Mangla have virtually reached dead levels diminishing hydro power generation considerably. As a result the Large Scale manufacturing (LSM) in Pakistan has stopped growing and its growth during the first nine months of the current fiscal year (Jul 11- Mar 12) has been less than a percent over previous year.  It has actually declined in February and March 2012 by over three per cent year on year. The textile sector, which accounts for 65 per cent of industrial workforce in Pakistan has been badly hit and over 200,000 power looms and hosiery units have been forced to shut down rendering thousands of daily wage workers jobless.  

 

Rising unemployment is not only providing ready recruits to the numerous militant outfits operating in Pakistan, but the anger against the government is also being harnessed by the politicians to disturb the delicate inter-provincial relations.  Shahbaz Sharif is already talking about a march to Islamabad and any strong arm action by Punjab causes deep consternation in smaller provinces.  Power crisis also makes Pakistan extremely vulnerable to the manipulations of external suppliers of energy resources like Saudi Arabia, Iran and UAE and their undue influence often aggravates the delicate sectarian fault lines in Pakistan.  The power crisis in Pakistan, thus not only affects its economy, but also destabilises the entire state structure and its polity. 

 

 

Views expressed are personal