ENERGY CRISIS IN PAKISTAN: CAUSES AND CONSEQUENCES

Moving from Conundrum to Catastrophe, energy crisis of Pakistan are hobbling the economy
and contributing to unrest. But the country has options.

Energy crisis is defined as price rise of the energy resources or a great shortfall in the supply of
the resources of energy. Usually it is referred to shortage of electricity, oil, natural gas, and
other natural resources.

Energy is the “oxygen” of the economy. The energy industry significantly influences the
vibrancy and sustainability of the entire economy – from job creation to resource efficiency and
the environment. Energy price shocks and supply interruptions can shake whole economies.
For countries that face chronic electricity shortages like Pakistan, continuing disruptions take a
heavy, ongoing toll.

Energy is considered as a backbone of any economy and plays an important role in the
socioeconomic development of a country. Energy is vital for running all the resources and
energy crisis directly influence all the sectors of economy such as agriculture sector, industrial
sector, unemployment, poverty, lower GDP and higher inflation.

PRESENT SITUATION

Among other challenges, the newly elected Pakistan Tehreek-e-Insaf government under the
leadership of Imran Khan inherits a very stagnant energy sector. Despite broad access to
electricity (99 percent of the population had access to electricity in 2016, compared to 59
percent of the population in 1990), the country experiences massive blackouts (load shedding
of 6-8 hours a day for households and 1-2 hours a day for the industry).

Because of poor energy management, Pakistan’s energy resources have been used inefficiently
for decades. As a result, the nation faces a serious energy crisis that has often stymied
manufacturing and the service sector and disrupted power supplies in communities and
households across the nation. According to a survey by the World Bank, 66.7 percent of the
businesses in Pakistan cite electricity shortages as a more significant obstacle to business than
corruption (11.7 percent) and crime/terrorism (5.5 percent). In light of these factors, there is an
urgent need to innovate in the energy sector of the country.

Fortunately, Pakistan has a high renewable energy potential. A recent report published by
USAID attests to Pakistan’s energy potential, stating that it can potentially produce 100,000
MW from solar energy alone. Despite the potential, Pakistan remains “powerless” when it
comes to adequately powering lights for its homes, machinery for its factories, and stoves for
its kitchens. Data from many sources, including the Ministry of Water & Power and Pakistan
Economic Surveys, over the past five years show that Pakistan has been facing an average
shortfall of between 4,000-5,000 MW.

Pakistan has three currently active nuclear power plants: two located in Punjab and one in the
southern port city of Karachi. The two Chinese built nuclear power plants in Punjab each have a
net generation capacity of 300 MW.34 35 The Karachi power plant, which was built with a
reactor supplied by Canada in 1972, has a net generation capacity of 125 MW, enough to
provide power to 2 million Pakistanis. 36 China has been a key supplier and investor in Pakistani
nuclear energy, but there are some concerns regarding the transfer of nuclear technology to
Pakistan, where A.Q. Khan’s nuclear network was headquartered. Specifically, China argues that
its alliance with Pakistan predates its joining of the Nuclear Suppliers Group (NSG), which has
restricted nuclear sales to Pakistan, so this justifies its desire to supply Pakistan with the
technology.37 The Chinese are helping construct four more nuclear power plants, the first of
which is expected to be online starting in 2019.38 While these plants will add 2,200 MW of
generation capacity, these nuclear power projects are expensive;39 the current nuclear power
plants under construction are said to cost about $5 billion per plant, an investment that China is
helping finance.4

Pakistan is in the midst of one of the worst energy crises in its history. This is both slowing the
pace of economic activity and causing public unrest with prolonged outages of electricity and
gas. Capacity utilization in some key industries has fallen to nearly 50 percent. Worst affected is
the fertilizer industry, which faces interruptions to its gas supply and forced closures. Pakistan
has the capacity to produce more than one million tons in exportable surplus urea, yet in 2011-
12 it imported more than 1.1 million tons. This eroded the country’s foreign exchange reserves
and effectively entailed the payment of millions of dollars in subsidies, being the difference
between the cost of locally produced and imported urea. Pakistan urgently needs to make
some strategic decisions and change the national energy mix.

Hydro, oil, and natural gas are the three primary energy resources of Pakistan used to fulfill the
energy needs of the economy. According to EAW 2013, the proportion of energy generation for
Pakistan is 36% from hydro and nuclear source, about 35% generation from furnace oil-fired
sources, 29% energy generation from gas-fired sources and 0.1% accounted from coal-fired
plants (see Figure 1: Source: EAW 2013). Due to limited oil reserves and political system,
Pakistan is importing large quantity of petroleum products from Middle East especially Saudi
Arabia.

Energy crisis is a burning issue in Pakistan today. Pakistan is mired in an acute energy crisis with
immense implications for both the nation’s floundering economy and its volatile security
situation. With the population explosion the demand for energy has increased but the
generation of more power remain neglected. Pakistan produces about 81 per cent of its
electricity through oil and gas, which costs us about 9.4 billion dollars. These costs make 53 per
cent of our total exports and are a significant cost burden on the products which we purchase
from other countries. Our demand for thermal power is so large that we simply cannot knock it
down and magically move to hydropower.

Pakistan is currently in the midst of two major societal shifts that could worsen the effects of its
energy problems in the years ahead. One is urbanization. While today the majority of Pakistan’s
population is rural, estimates suggest that at least 50% could be concentrated in urban areas by
the 2020s. Demand for electricity is particularly high in cities, because urban-area industries
and homes tend to be more dependent than those in the hinterland on grid-connected energy
sources. With droves of Pakistanis entering cities and becoming dependent on grids, pressures
on supply will deepen exponentially.

Pakistan’s other notable societal shift that could worsen the energy crisis is the devolution of
governance from the federal level to the provincial and local levels. Thanks to the 18th
constitutional amendment, which President Asif Ali Zardari signed in 2010, federal ministerial
responsibilities and resources are being passed down to local authorities and agencies. This
means that many new energy-related functions and duties are being foisted upon provincial
and district governments, which suffer from even more capacity constraints, inefficiencies, and
financial troubles than their federal counterpart. Local governments will likely inherit the
ineffective policies of the federal government as well. Given the central government’s inability
to address the country’s energy crisis, there is even less reason to expect that short-handed
local-level authorities are up to the task.

Time is running out, however. Pakistan faces rapidly dwindling foreign reserves and a plunging
currency that late last year fell to a record low, and double-digit inflation is projected to hit this
year. There is the very real fear that Pakistan could soon find itself unable to afford to address
its energy crisis—meaning that even stopgap, short-term measures to expand power
generation could be eliminated. Such a scenario would presumably increase the frequency and
violence of public protests and threaten the state’s ability to maintain order. The consequences
could be catastrophic for the country’s economy and stability.

Pakistan is blessed with ample indigenous energy resources; it is especially rich in natural gas,
hydroelectricity, and coal. However, in the case of the two most utilized sources of energy—oil
and gas—consumption levels are so high that these domestic resources are being rapidly
depleted. Pakistan’s national oil and gas company, Oil and Gas Development Company Limited
(OGDCL), predicts indigenous oil reserves will be exhausted by 2025, and that Pakistan will run
out of domestic sources of natural gas by 2030. Meanwhile, hydroelectricity supply is imperiled
by climate change, with less rainfall reducing river flows.

The average shortfall in the power sector is 4,000 MegaWatts, and nearly two billion cubic feet
per day (BCFD) in the natural gas sector.The shortfall in the power sector can rise to around
7,000MW or 32pc of total demand for electricity.Chronic power shortage, in the form of load-
shedding and power outages, costed the Pakistan economy Rs14 billion (7pc of GDP) last
year.Over 140 million Pakistanis either have no access to the power grid or suffer over 12 hours
of load-shedding daily. Meanwhile, household electricity consumption has grown at an average
annual rate of 10pc yearly.500,000 households are impacted with unemployment as businesses
have been forced to shut down due to energy shortages.

In the last five years, Pakistan has taken a hit of Rs145 billion per annum from system losses in
the grid due to inefficient transmission and distribution. Investment in the power sector has
fallen to 0.7pc of the GDP in the last 10 years, from a high of 1.5pc during the 1980s and 1990s.
Rs30 billion is the approximate expenditure by Pakistani households on UPS and battery
chargers alone. About 60pc of Pakistani households have some form of UPS as a backup for
selected appliances during power cuts and shortages. Backup power sources are a stopgap
solution, both wasteful and inefficient.

Emerging in 2006-07, Pakistan’s energy crisis still haunts the country — be it lengthy load-
shedding, the growing demand-supply gap, energy insecurity, increasing reliance on imports
and circular debt. In recent years, it has become more complicated both in dimension and
intensity.

The energy crisis has cost the national economy dearly, not only the loss to GDP in terms of
missing energy due to the demand-supply gap but also the loss to industrial and commercial
activities due to load-shedding and flight of capital from the country. Safe estimates suggest
that it has cost the national economy over $100 billion.

The crisis has played havoc with our industrial activities. In industrial cities such as Karachi,
Lahore, Gujranwala and Faisalabad, thousands of factories have shut down or are operating at
the bare minimum level, which has resulted in huge flight of capital as investments have shifted
elsewhere. Countries like Canada, Malaysia and UAE as well as Bangladesh and Sri Lanka saw a
major influx of Pakistani investors.

According to the available data, at present installed power generation capacity in Pakistan is
estimated to about 22,500MW (excluding the Karachi Energy Supply Company, more on which
below), but actual power generation hovers around 15,000MW, partly because of outdated and
inefficient power plants and partly because of a cash crunch, which often does not permit
power plants to operate at optimum capacity because of the inability to buy the required
furnace oil. This could be best understood when one looks at the available data on power
plants operating in the public sector, which have an installed capacity of over 4,800MW but
actual generation hovering around 1,200MW.

At present, the bulk of electricity supply comes from hydroelectric plants (6,500MW) and IPPs
(6,500MW). The output of the hydro plants is dependent on water availability in the dams, and
can fall to as low as 2,500MW when water levels drop drastically. And as we have seen, IPP
output is limited by money problems.

Of Pakistan’s 6,500MW hydro capacity, the bulk is contributed by three projects: Mangla,
Tarbella and Ghazi Brotha. There are nearly two dozen IPPs, but the major players are Hub
Power Company, Kot Addu Power Company and Uch Power Plant. Pakistan also has three
nuclear power plants, two in Punjab and one in Karachi, with aggregate capacity of over
800MW. However, the Karachi plant is at the end of its effective life and its capacity cannot be
termed “dependable.”

Unlike the rest of Pakistan, Karachi gets its electricity from a compact utility, Karachi Electric
Supply Company (KESC), which handles generation, transmission and distribution. The bulk of
its generation comes from the Bin Qasim Power Plant, which has an installed capacity of
1,260MW. Another 500MW comes from smaller units. Since privatization, KESC has added
another 500WM capacity at Bin Qasim but its output has remained erratic because of the
inconsistent supply of gas.

Everyone is aware of how transmission and distribution losses, and increasing power theft
across the country, are causing the monthly bills of honest consumers to swell and leading to
growing inter-corporate debt in the supply chain. On top of that, distribution firms are unable
to recover a hefty amount billed to industrial, commercial and domestic consumers every
month. The power-sector debt has spiked to almost 3pc of GDP despite a substantial rise in
electricity prices effected under the previous PML-N government to make up for losses suffered
on account of system inefficiencies and theft. A report in this newspaper early this year had
quoted Pepco officials as having told the Public Accounts Committee that distribution
companies had lost Rs213bn in one year because of line losses. Their stock of receivables from
different types of government and private consumers has surged close to 2pc of GDP. So the
minister was spot on when he stated no effort to end blackouts could succeed, even if the
floodgates of electricity supply were opened. This is exactly what has happened in the last five
years.
GENESIS

Aside from the distinct challenges of financing “sunk” and “fixed” costs amid the historic debts
and chronic losses, another significant constraint is the lack of appropriate technology in the
implementation of energy productivity policy.

This acute energy crisis is a result of flawed energy policies pursued for decades, the high cost
of generation, and aging and inadequate transmission, among other causes. In addition to
transmission losses and distribution thefts, an entrenched bureaucratic culture marked by poor
organization, planning, and project implementation among Pakistan’s power operating
companies only compounds the problem.

Power shortages are also rooted in Pakistan’s irrational and increasingly unaffordable energy
mix: 64 percent thermal, 30 hydropower, and 6 percent nuclear. A high reliance on thermal
power plants (which in turn are run by natural gas, oil, or coal) and hydropower seldom assure
a continuous flow of power. Heavy dependence on oil-based energy makes power high-priced.
The prevailing energy crisis is costly to the economy in the form of huge subsidies and high
circular debts. Politicians and policymakers in Pakistan have made little real attempt to diversify
the nation’s energy supplies and to shift dependence form expensive and imported oil toward
potentially cheaper and cleaner resources available in the country (Pakistan’s dependence on
oil imports is 24 percent, compared to India’s 18 percent and Bangladesh’s 21 percent).
Pakistan’s stubborn reliance on fossil fuels continued even after the oil shocks of 1973 and
1979.

The misguided energy mix also exacerbates the nation’s already serious environmental
problems, which manifests itself in poor air quality and unsafe drinking water. Pakistan ranked
a dismal 148th out of 175 countries, according to Yale and Columbia University’s Environmental
Performance Index.

Technological penury is one prime reason why Pakistan has not been able to capitalize on its
high abundance of renewable energy potential. The lack of technological knowhow also helps
to explain why non-hydro renewables currently account for less than 4 percent (roughly
900 MW) of total installed electricity capacity against the medium-term plan of having a
minimum capacity of 9,700 MW by 2030. Given this, the role of technology transfer in
developing renewables and adopting energy conservation is worth exploring.

Pakistan like other developing countries is one of the energy intensive growing economy, and
its energy needs are met by large quantities of oil imports. Pakistan energy's infrastructure is
not well developed and said to be managed poorly. Moreover electricity theft and transmission
losses due to outdated infrastructure have worsened the situation. In Pakistan most industries
are not self capable of generating power and also distressed with heavy taxes and costly energy
supply with continuous disruption which results in loss of output production especially textile
industry whose exports are restricted to a very low level and are shutting down or either
shifting to the neighbor countries.

Has any goal-oriented policy and road map been developed to drive Pakistan towards a
sustainable energy future? Efforts here too have been sparse. The diverse and complicated
nature of the crisis demanded a paradigm shift in the modus operandi: a holistic and coherent
energy policy, a goal-oriented approach and an implementation road map. But the situation is
without direction. Various ministries, departments and cells still work haphazardly without any
meaningful coordination. No value-engineering behind the projects is emerging. Important
issues — an imbalance in the energy fuel mix, addressing our energy security by lowering the
reliance on imports, and the lack of utilisation of cheap and indigenous hydropower and
renewable resources — do not appear to be challenges that cause concern to the authorities.

A Lack of Strategy and Political Will

A subset of the energy financing problem is an inability or unwillingness to muster the

necessary political will to address the money shortage. More broadly, Pakistan has never
developed a comprehensive, integrated energy strategy, and Islamabad’s haphazard policies
have failed to address the crisis’s deep roots. The problem lies not with civil servants,
bureaucrats, and technical experts who focus on developing energy policies (many of them
reasonable and actionable), but rather with the non-expert, high-level political appointees
spread across the energy sector and beyond who are charged with implementing them. There is
no shortage of research, conferences, and proposals offering policy solutions. However, these
measures are not executed, because there is no political will to do so. This has long been the
case at both federal and provincial levels, as well as with different political parties.

Thar coalfields in Sindh Province, where 200 billion tons of reserves have lay dormant since
their discovery more than twenty years ago are the world’s sixth-largest coal deposit. Thar can
be a special economic zone, hoping to lure investors with tax breaks and other incentives.
However, what both the government and political opposition fail to articulate is how Pakistan
will overcome the formidable challenge of developing the technological and labor capacity to
exploit this potential bonanza. Another problem is purely political. Ever since the Thar coal was
discovered, the central government has been locked in a disagreement with the Sindh
provincial government about how to divvy up the spoils. Islamabad has proposed an 80/20
split, while Sindh has insisted that it retain full control of the coalfields. This 22-year-old
disagreement has effectively put on hold the exploitation of Thar’s resource treasures and
crystallizes how Pakistan’s energy woes are as much (if not more) a governance and political
issue as one of supply and demand.
Annual population growth in Pakistan is higher compared to its regional counterparts, including
India, Bangladesh, Sri Lanka and Nepal. This higher population growth has increased the
electricity demand.

Former U.S. secretary of state Hillary Clinton has claimed that only 2 million of Pakistan’s
population of 180 million pay income taxes, while Pakistan’s Federal Board of Revenue
estimates that 700,000 wealthy Pakistanis are not paying their returns. The latter figure, in
particular, suggests that revenue gains from increasing the number of citizens paying taxes
could be tremendous. However, the government refuses to pressure its most affluent citizens,
because many of them are politically connected or politicians themselves. And admittedly,
there is no guarantee that Islamabad would actually use this added tax revenue to cover its
energy debt; it could well spend the revenue on the repayment of other debts, administrative
costs, or even defense.

The PML-N’s focus on new generation capacity only exacerbated the crisis because it didn’t
invest in reducing line losses, plugging theft and fully recovering bills. The dollar-based
guaranteed returns and (idle) capacity payments to producers have added to the government’s
financial woes and made electricity unaffordable for industry and domestic consumers.

Pakistan’s woes have been exacerbated by its excessive reliance on thermal power plants,
mainly using furnace oil. Two factors contributed to the emergence of this situation: a change
in lenders from the public to private sector, and Pakistan’s failure to complete a hydroelectric
project in recent decades. The last mega dam, Tarbella, was completed in the mid seventies and
no other dam has been constructed since. After the signing of the Indus Water Treaty with
India, Pakistan was required to complete construction of one mega-size hydroelectricity plant
per decade to ensure year-round availability of low cost electricity and irrigation water.

Experts blame many of Pakistan’s problems on the “circular debt,” which mainly arises because
of the poor recovery of receivables by the distribution companies. It is estimated that for every
100 units of electricity provided by a distribution company, it gets paid for 30. Of the remaining
70 units, nearly 40 are pilfered and the bills for the remaining 30 go to long-term receivables.
Corrupt utility executives and workers contribute to this dismal state.

Ultimately, there is just one obstacle to the implementation of these measures, and that is
leadership. For years, Pakistani officials have had promising policies at their disposal; yet they
have been unwilling or unable to move forward.
EFFORTS

Pakistan has three currently active nuclear power plants: two located in Punjab and one in the
southern port city of Karachi. The two Chinese built nuclear power plants in Punjab each have a
net generation capacity of 300 MW.34 35 The Karachi power plant, which was built with a
reactor supplied by Canada in 1972, has a net generation capacity of 125 MW, enough to
provide power to 2 million Pakistanis. 36 China has been a key supplier and investor in Pakistani
nuclear energy, but there are some concerns regarding the transfer of nuclear technology to
Pakistan, where A.Q. Khan’s nuclear network was headquartered. Specifically, China argues that
its alliance with Pakistan predates its joining of the Nuclear Suppliers Group (NSG), which has
restricted nuclear sales to Pakistan, so this justifies its desire to supply Pakistan with the
technology.37 The Chinese are helping construct four more nuclear power plants, the first of
which is expected to be online starting in 2019.38 While these plants will add 2,200 MW of
generation capacity, these nuclear power projects are expensive;39 the current nuclear power
plants under construction are said to cost about $5 billion per plant, an investment that China is
helping finance.

Encouragingly, Pakistan is also starting to explore other alternative energy sources. Officials
have said several small-scale wind projects are under construction. The government has also
announced that by 2030 it plans to have a minimum of 5.0% of total commercial energy supply
provided by wind, solar, and biowaste, and that 2.5% of Pakistan’s overall energy generation
will come from renewables. Islamabad claims that by 2030 about 5,500 MW of Pakistan’s
projected 160,000-MW daily energy requirement will come from alternative and renewable
sources. These are admittedly ambitious goals, given the miniscule role renewables play in the
current energy mix.

Pakistan’s Planning Commission, however, offered some hope. In 2011, the commission
released what it described as a “new framework” for economic growth. In the context of
energy, the document proposes some of the most far-reaching and comprehensive policy
measures ever introduced in Pakistan—from full-scale sectoral deregulation to governance
reform and the phasing out of many subsidies. Unfortunately, there are several problems. One
is that while the Planning Commission is part of the government, it lacks implementation
power, and no government entity has stepped up to embrace the commission’s ideas and take
on the mantle of implementation. (In fact, government agencies often spar with the Planning
Commission.) Another dilemma is that the Planning Commission insists that such measures are
only implementable after the country has established an integrated energy policy, which has
still not happened.
 Pakistan announced a national energy plan in 2010, though it was dominated by much-
mocked—and likely ignored—conservation measures, such as bans on all-night wedding parties
and neon billboards, along with the required early closures of street markets. (A more realistic
demand-management strategy, announced last year by the Asian Development Bank, calls for
the distribution of twenty million low-energy light bulbs.) Other well-intentioned initiatives
have likewise not produced results. Pakistan has established the National Electric Power
Regulatory Authority (NEPRA), charged with ensuring fair energy competition and consumer
protection, but political interference undermines its autonomy and effectiveness. Tariff
decisions must be approved by Islamabad, and NEPRA’s four members are all selected by the
government. Furthermore, government officials have been known to outright ignore the body’s
decisions.

For short-run Pakistan is implementing various strategies such as payment of circular debt, coal
based 600MW electricity plant at Port Qasim with the help of China, 10,000 acre solar park in
Punjab with Chinese support and importing electricity from Iran but for long-run government
promptly needs to take some serious steps on priority basis to completely end energy crisis.

Pakistan is already making an effort to diversify by pursuing separate pipeline projects with Iran
and with Turkmenistan, Afghanistan, and India. However, a variety of factors (international
sanctions–based with the former, and security-oriented with the latter) suggest that these
projects are far from being consummated. In the meantime, Pakistan should take advantage of
its enhanced commercial relationship with India to import energy from that country. Already,
the two nations have concluded a deal to export electricity to Pakistan, and they have created a
joint working group on petroleum to explore further possibilities for energy trade.
Hypothetically, Pakistan-India energy trade could be expanded to feature more region-wide
energy commerce, with organizations such as the South Asia Association for Regional
Cooperation (SAARC) providing an institutional platform. However, the fractious political
relations between South Asia’s states make this prospect unlikely in the near term.

In the early 1980s, Pakistan experimented with establishing a more coordinated system, but
those efforts petered out due to capacity constraints. Today, some influential players in the
energy scene—including policymakers—have indicated their support for revisiting the idea.

New power projects have been launched to reduce the supply-demand gap and hence to
control electricity load-shedding. Successful completion of these projects may help Pakistan
overcome this issue. Otherwise, agriculture loss would increase to Rs90.75bn and industrial loss
would jump to Rs146.90bn billion by 2050. Over the same period, the loss in services sector
caused by electricity outage could reach Rs236.46bn.
Immediately after assuming power, the government of Nawaz Sharif came up with two policy
decisions: pay half a trillion rupees (just under $5 billion) to energy companies and announce a
new power policy. Both steps are aimed at resolving problems plaguing the companies
belonging to the energy chain and bringing change to Pakistan’s energy mix to optimize the
average cost of electricity generation.

Shareef government paid Rs260 billion in cash to independent power plants (IPPs) to clear
outstanding debt. It also issued bonds to pay off liabilities pertaining to state-owned companies
such as exploration and production firms and oil and gas marketing entities. After clearing the
debt of the IPPs, it was expected that they would be able to generate 1,700MW in additional
electricity, attenuating the shortfall that currently exceeds 6,000MW. The situation is likely to
improve over time.

In 2010, country’s first rental power plant (RPP), with the capacity of 232 MW was inaugurated
in Karachi.

HISTORICAL BACKGROUND

The current crisis started in 2006-07 with a gradual widening of demand and supply. Since then
this gap has become more pronounced with electricity shortfalls reaching a peak of 6,250
megawatts in June 2018, more than 30pc of total national demand.

In 2011-12, Pakistan faced a loss of Rs210 billion and $1bn of export earnings owing to load-
shedding in the industrial sector. These power outages also displaced more than 400,000
workers.

Estimates and projections show that over Rs253bn of GDP (agriculture, industry and services
sector) was lost owing to electricity shortage in 2015 which will continue to grow till the end of
forecast period 2050.

2007: Pakistan faced one of its biggest power failures after Bhutto’s assassination in which
production fell by 6,000 MW.

2008: The demand and supply gap pertaining to electricity in Pakistan increased by 15 per
cent.The major load shedding crisis also commenced in the same year with power outages
extending up to 16 hours a day in many cities of the country.

2009: In the same year, Karachi faced one of its most crucial power breakdowns on June 17 in
which the entire city was without power for 21 hours and more.Moreover, the country faced a
power shortfall of 4,500 MW in the same year with the domestic demand rising up to 11,000
MW. However only 6,500 MW of generated power was catering to the entire demand.
2010: The torrential rainfall in the year resulted in floods which caused much damage to the
existing infrastructure transmitting/transferring energy and fuel.

2011: The year started with the shut down of Uch power plant producing 585MW of electricity,
as one of the pipelines providing fuel was blown up in the district of Jaffarabad. Pakistan faced
one of its most crucial gas crises, with the shortfall rising up to 1.8 billion cubic feet (bcf).

The year also experienced the worst CNG load shedding resulting in losses and problems for the
consumers. However OGRA increased the gas tariff by 14 per cent in the beginning of the year
which was one of the biggest tariff hikes in the history of Pakistan. Moreover, the energy
shortfall reached up to 2,700 MW.

Origins and Nature of the Current Crisis

The origins of Pakistan’s energy crisis can be traced back to the 1990s. A major energy crisis was
actually averted in the 1970s, when the government launched the massive Mangla and Tarbela
dams, leading to a short-lived period of robust hydro-driven energy generation that ably
responded to demand. However, after a period of strong economic growth in the 1980s, energy
demand soared, and supply and infrastructure could not keep up. The government sought to
ramp up generation but was unable to satisfy demand. As Pakistan’s population has risen, and
as urbanization has spawned the rise of new industries and other corporate energy customers,
the situation has continued to worsen to the present day. Electricity shortfalls reached a peak
of 8,500 megawatts (MW) in June 2012—more than 40% of national demand.

At the same time, governance shortfalls (and not just of the corruption variety) are a key
challenge for the power sector. Pakistan’s energy policies come under the purview of several
government ministries and agencies, but coordination is lacking, clear lines of authority are
absent, and interagency turf wars are legion. The sector also suffers from gross inefficiencies
(including 30% transmission and distribution losses), and electricity theft is rife; Pakistanis can
regularly be seen hooking onto power lines.

Yet one of the most critical deficiencies plaguing the energy sector is money. With Pakistan’s
economy struggling, liquidity is dangerously low. In effect, energy consumers, private
producers, the national transmission agency, distribution companies, and even the government
itself cannot pay their power bills. Of note, according to figures provided by Pakistan’s water
and power ministry, “influential defaulters” owe about $1 billion in overdue energy bills. As a
result, the energy sector is deprived of desperately needed revenue to pay for generation,
transmission, and distribution, as well as operating and administrative costs. This gap between
revenue and expenses—often referred to as “circular debt”—has approached a whopping $4.5
billion and is worsened by the fact that, thanks to generous government-funded subsidies,
energy end-costs for consumers are always lower than the actual cost of production.
Consequently, the country cannot afford to provide a regular supply of power.

SUGGESTIONS

In fact, presenting energy efficiency as “doing more with less,” as is the case in developed
countries, tends to get lost in translation in countries such as Pakistan. Thus, a change in the
energy efficiency paradigm is needed to better promote energy efficiency in a way that links
such efforts to improved living standards and increased prosperity. A more inclusive alternative
narrative such as energy productivity should be advocated — that is, producing more goods and
services with the same energy (equivalently, “doing more with the same”). As opposed to the
traditional energy efficiency paradigm focusing solely on fewer inputs (“more with less”),
energy productivity focuses on generating more outputs with the same inputs.

Beyond the reframing of energy efficiency as a rhetorical concept, there is a need for
developing a sound and thoughtful energy productivity policy framework. Such a policy
framework would inculcate renewable energy as a significant aspect of energy productivity
policy. In the process, it would ameliorate energy security, address environmental degradation,
stimulate economic growth, and, last but not least, mitigate public worries.

However, the energy productivity policy and its subsequent implementation cannot be viewed
in a vacuum. Cautious deliberations by concerned institutions must take place to advance the
tactical and strategic goals that are sought. In this regard, the government of Pakistan must play
a prominent role not only to ensure political stability and institutional revamp but also to
guarantee regional peace and security.

The path to a sustainable power sector and affordable electricity lies in politically tough
decisions, starting with an indiscriminate crackdown on big electricity thieves and defaulters.
Simultaneously, the state-owned power companies need to be revamped, use of technology
encouraged and money invested in the distribution network. The government says it is ready to
take hard decisions. But will it walk the talk? That remains to be seen.Although the government
is attempting to add capacity to the grid in order to remedy the persistent power shortage,
these measures will take time to come into effect.
Pakistan must bring some urgently needed order and efficiency to its chaotic and dysfunctional
energy sector. A better coordinated and integrated energy sector can best be attained through
the consolidation of the country’s many energy-related institutions into a single ministry. A
tighter institutional set-up would allow Pakistan’s energy sector to enjoy better coordination of
planning, decision-making, and above all implementation. This would in turn enable it to do
away with the reactive, haphazard, and ad-hoc policy environment that has characterized the
energy sector for years.

There are some short-term steps that Pakistan can and should take. One is to formally request a
new loan from the International Monetary Fund (IMF) to bring both immediate relief to the
economy and badly needed liquidity to finance solutions to the energy crisis.

A more immediate solution to the problem is the conservation and efficient use of energy, as
about 67pc of domestic energy consumption stems from inefficient appliances such as lights
and fans.

Another alternative is to shift to renewable forms of energy, such as wind and solar power.

There is enough potential from wind generation to supply all of Pakistan's electricity needs. Half
this potential exists in one contiguous belt of Sindh coastline.

The use of solar irrigation pumps for agricultural purposes instead of diesel-powered or tractor
driven pumps could mean a 27pc saving in consumption of diesel fuel for irrigation pumping.

The China Pakistan Economic Corridor is another way Pakistan could turn towards cleaner
forms of energy, as China is a world leader in total wind and solar installed renewable energy,
at about 140,000MW.

Punjab must lead the way in this initiative, as the province is home to the largest population in
Pakistan and consumes the most electricity. About 90pc of all tubewells are also in Punjab.The
Raftaar report says the greatest responsibility and opportunity lies with the province to
improve energy efficiency and conservation in agriculture, as well as in households and
businesses.

Measuring the economic cost of energy crisis at the sectoral level enables policymakers to
formulate a wide-ranging energy and economic (sectoral level) policies. To support sectoral
growth, as well as aggregate GDP, the cheapest option to produce electricity should be utilised.

Hydel is the cheapest source of electricity production but it is a long term project. So, the
government must build new but small dams on a priority basis to cover power outages. The
cost of these dams can be covered by reducing unnecessary administrative expenditures.
Domestic finances can be generated by the implementation of equitable taxes and allocated
finance via taxes to electricity generation projects. The financial and infrastructural incentives
should be announced and provided to attract investment by local and foreign sources.

Furthermore, an energy efficient technology should be adopted and encouraged. Adoption of

electricity saving devices and electricity saving responsiveness must be encouraged at
household level via strong television campaign.

To control electricity prices, the government should not depend on rental power projects.
Instead, new sources of energy should be explored as Pakistan is full of natural resources. For
example, Pakistan is the 4th economy in the world which has the largest coal reserves.The
government should convert coal into natural gas by adopting apposite technology. Pakistan
should implement Fischer-Tropsch Technology that can save a huge amount of foreign reserves
spending on oil imports.

The need of the hour is a well-researched multi-pronged approach formulated in conjunction

with federal and provincial governments, relevant ministries, national power generation and
distribution companies and experts on traditional and alternative energy sources.This kind of
mechanism will ensure that capabilities and shortcomings of the existing system are fully
comprehended and future endeavours are based on a long-term vision considering the
country’s growth requirements and technological developments in the energy sector.

The entire energy sector, in terms of administration and functions, needed to be overhauled;
malpractices and wrongdoings that caused the crisis to be corrected; and projects and deals
transparently handled. But the state of affairs shows that little has changed; in fact, strong
efforts are needed to ensure transparency and merit. Moreover, reckless decision-making must
be avoided. It is unfortunate that powerful lobbies still appear to be dictating key energy
decisions.

Vast, untapped indigenous resources including hydropower, renewables and fossil fuels can
help with energy security and affordability.

Energy conservation, the cornerstone of energy strategies across the world, has to be
embedded in the national energy fabric, not just in letter but also in spirit. Our human
resources are competent enough to rise to the occasion. What is really missing is the
combination of vision, strategy and commitment on the part of policymakers.

To overcome its electricity shortage, Pakistan has to come up with policies for the short,
medium and long terms. The first step for the short term has been taken by clearing
outstanding debt. Now, supporting policies must be prepared and implemented to ensure that
circular debt does not rebuild. This requires containing theft and improving recovery.
A hike in the electricity tariff could improve cash flow at distribution companies, but opponents
argue that a higher tariff itself provides an incentive to pilfer electricity. They say the
government should ensure an uninterrupted supply of electricity at affordable cost.

As a medium-term policy, all power plants operating in the public sector need to be refurbished
to improve efficiency, which will help bring down the cost of generation.

However, the focus should be on achieving the highest possible output from hydro power,
where the cost of generation is still Rs2.00/units, compared to the bulk power purchase tariff of
US$0.70/unit being paid to IPPs, mostly being run on furnace oil.

Simultaneously, efforts should be made to switch power plants from furnace oil to coal. Gas
should be avoided. To begin with, power plants could use imported coal, but ultimately they
will need to use an indigenous source. In this endeavor, Lakhra Power Plant near Karachi, which
has been closed for some time, must be reactivated as soon as possible. It uses coal produced
at nearby mines.

Under long-term measures, the government must prioritize the completion of the Thar Power
Plant. Thar has more than 185 billion tons of lignite coal, suitable for mine-mouth power plants.
It is estimated that Pakistan could generate more than 50,000MW of power from Thar coal
alone.

Experts say Pakistan should focus on hydro generation as the country has the potential to
produce 40,000MW by constructing small and midsize dams and run-of-the-river projects. Two
of the latter type (Ghazi-Broth and Laraib) are already in operation. The advantages of these
projects are minimum displacement of people and minimum areas under water. An added
advantage is the renewable aspect.

Pakistan also has the potential to get electricity from sugar plants located across the country,
especially in rural areas. Some industry experts suggest that sugar mills could deliver up to
3,000MW to the national grid. This option is very lucrative, because sugar mills will mostly use
very low-cost bagasse to heat the boilers, using furnace oil only as a supplement. Yet another
advantage of sugar mills is that they have the capacity to produce ethanol, which can be added
to motor gasoline to produce E-10 (petrol containing 10% ethanol). This will help contain oil
imports and conser After a new institutional arrangement is in place, Pakistan could move on to
policy reform. This should include new pricing measures that remove not all, but many, energy
subsidies.

Tax reform is another imperative—and should be designed to provide Islamabad with more
revenue not just to address the energy crisis but also to assist poor Pakistanis harmed by the
phase-out of subsidies.
Pakistan should also make improvements on the energy-demand side—such as by aiming to
reduce by half the 30% in losses arising from distribution and transmission (a goal that will
entail crackdowns on energy theft).

Both federal and provincial authorities should be more vigilant about keeping up with
necessary maintenance and repairs at all generation, distribution, and transmission facilities in
order to minimize leakage and other losses.

Any efforts to improve energy governance will need to occur in tandem with measures to curb
wasteful water consumption. Decades of water-intensive agricultural practices—including
widespread and subsidized flood irrigation—have helped deplete surface water tables and
prompted farmers to expend excessive electricity on tubewells to extract groundwater.

Finally, Pakistan should better diversify its energy mix. This can be done initially by importing
clean coal, which is often cheaper than imported oil and gas. With time, if the political spats
over Thar’s reserves can be worked out, then the nation would ideally begin to focus on
developing indigenous supplies—though a variety of challenges, such as transporting the coal
across the nation and overcoming possible resistance to environmental costs, would remain. ve
compressed natural gas.

CONCLUSION

As the saying goes, there is opportunity in crisis, and this certainly applies to Pakistan’s energy
sector. Notwithstanding the significant challenges, a large market and an enthusiastic
government could entice bold investors, local and foreign.

Pakistan’s acute energy crisis is posing a serious predicament for its feeble economy and
volatile national security environment. The country’s energy problems are deep and complex,
being rooted more in shortages of governance and political will than of pure supply. This stems
from (1) the absence of a comprehensive and integrated energy strategy, resulting in
interagency turf wars and a lack of coordination, (2) insufficient revenue to support energy
generation and infrastructure, owing to low liquidity in Pakistan’s struggling economy and high
rates of tax default, and (3) the leadership’s unwillingness to implement politically unpopular
changes to address the situation.

Resolving Pakistan’s energy crisis will thus require political will, additional funding, and new
power-generation sources. As the country lacks significant internal sources of revenue,
opportunities exist for international donors to finance its energy recovery. However, indigenous
energy solutions should not simply be discarded, and the Pakistani government should explore
the Thar coalfields and alternative energy sources, among other options.

Resolving this crisis will require far more than power-generation expansion and other supply-
side quick fixes, the de facto policy of the country’s political leadership. Pakistan’s energy
problems are deep and complex, and are rooted more in shortages of governance and political
will than of pure supply. If the nation is to overcome this crisis, it will need to begin with whole-
scale institutional energy sector reform—a politically unwelcome, yet utterly essential,
prerequisite for energy relief. Necessary reforms can then follow. The success of such efforts,
however, will hinge on the existence of leaders willing to prioritize long-term national
development and well-being over short-term political considerations.

I promote an alternative approach of energy productivity policy that not only redefines energy
efficiency, but also includes it along with an emphasis on renewable sources to address energy
crises in Pakistan. Concerned ministries would have to be cognizant of the conditions in the
energy productivity policy that would ameliorate power blackouts. For successful
implementation of the policy, the government would have to ensure that regulatory agencies
coordinate their efforts with power companies to improve energy distribution, generation, and
transmission. Undoubtedly, the government would show its firm resolve in promoting energy
productivity reforms and eliminating constraints to effective energy productivity policy
implementation. Only then the nation will witness an “energized” homeland, healthy
environment, improved economy, and, ultimately a better quality of life for all citizens.

1952: The first oil field in Pakistan was discovered in the province of Balochistan near a Sui
gas field.

During the same time period, Sui gas field, which remains the biggest natural gas field in
Pakistan, was discovered.

1955: Commercial drilling and exploring of Sui gas fields was started. Sui gas field contributes
substantially to fulfil Pakistan’s fuel requirements and have a daily production of approximately
550 MMscf. http://www.ppl.com.pk/content/sui-gas-field-overview

Pakistan Petroleum Limited (PPL) discovered gas reserves at Uch gas field.

ARTICLE CONTINUES AFTER AD

1964: The Toot Oilfields, located in the Potwar region of Punjab were found. During Ayub
Khan’s regime Pakistan Petroleum and Pakistan Oilfields explored and drilled the first well.

Toot Oilfields have an approximate capacity to produce 60 million barrels of oil.

1967: The commercial production from Toot Oilfields started in 1967.

1976: Dhodak gas field was discovered in the province of Punjab.

1981: Union Texas Pakistan discovered an oil field in lower Sindh.

1983: Dakni gas field, located about 135 Kms in the south-west of Islamabad, was discovered in
1983.

1984: Tando Adam oil field, located in Hyderabad, was drilled and completed.

1986: The year witnessed the peak in oil production from Toot Oilfields which was 2,400 barrels
per day.

Moreover, Chak Naurang field located 90 kms away from Islamabad was discovered in the June
of 1986.

1989: Dakni gas field started commercial production in December 1989.

1990: Qadirpur gas field was discovered in the province of Sindh. It remains the third largest gas
field in Pakistan.

1994: Rajjan oil field, located in Gujjar Khan, was discovered.

1998-1999: The oil fields owned by Union Texas Pakistan were producing more oil than the
Potwar wells.

2000: Balochistan Liberation Army allegedly bombed one of the minor pipelines transmitting
gas from Sui gas fields.

2004: Chanda oil fields located in Khyber Pakhtunkhwa started oil production.

2005: International Sovereign Energy, a Canadian company, signed an MoU with Oil and Gas
Development Company Limited. The memorandum entailed further development of Toot Oil
Fields.

Pakistan was hit by one of its most devastating earthquakes which resulted in a vast damage to
the infrastructural capital responsible for transmitting/transferring fuel.

In the December of 2005, Karachi electric Supply Company, one of the largest vertically
integrated power supply company in Pakistan was privatised.

2006: Mela oil fields were discovered in the area of Kohat located in the province of Khyber
Pakhtunkhwa.
2007: Pakistan faced one of its biggest power failures after Bhutto’s assassination in which
production fell by 6,000 MW.

2008: The demand and supply gap pertaining to electricity in Pakistan increased by 15 per
cent http://www.energytribune.com/articles.cfm?aid=864

The major load shedding crisis also commenced in the same year with power outages extending
up to 16 hours a day in many cities of the country.

http://www.pakistantoday.com.pk/2010/10/power-tariff-doubled-in-3-years-outages-
continue/

2009: NASHPA oil fields were discovered in Karak district of Kyber Pakhtunkhwa.

In the same year, Karachi faced one of its most crucial power breakdowns on June 17 in which
the entire city was without power for 21 hours and more.

http://centralasiaonline.com/en_GB/articles/caii/features/2009/06/23/feature-02

Moreover, the country faced a power shortfall of 4,500 MW in the same year with the domestic
demand rising up to 11,000 MW. However only 6,500 MW of generated power was catering to
the entire demand.

http://www.dailytimes.com.pk/default.asp?page=200914\story_4-1-2009_pg3_1

2010: Sheikhan gas field, which is located in Kohat, Kyber Pakhtunkhwa, was discovered.

Moreover, the torrential rainfall in the year resulted in floods which caused much damage to
the existing infrastructure transmitting/transferring energy and fuel.

Towards the end of the year, country’s first rental power plant (RPP), with the capacity of 232
MW was inaugurated in Karachi.

http://www.brecorder.com/top-stories/single/595/0/1125661/

2011: The year started with the shut down of Uch power plant producing 585MW of electricity,
as one of the pipelines providing fuel was blown up in the district of Jaffarabad.

https://www.dawn.com/2011/02/24/gas-pipeline-blast-shuts-power-plant.html

Pakistan faced one of its most crucial gas crises, with the shortfall rising up to 1.8 billion cubic
feet (bcf) http://tribune.com.pk/story/318266/gas-crisis-will-be-brought-under-control-in-six-
months/
The year also experienced the worst CNG load shedding resulting in losses and problems for the
consumers. However OGRA increased the gas tariff by 14 per cent in the beginning of the year
which was one of the biggest tariff hikes in the history of Pakistan.

http://www.brecorder.com/fuel-a-energy/single/630/193/1266469/

Moreover, the energy shortfall reached up to 2,700 MW.

https://www.dawn.com/2011/04/19/energy-shortfall-reaches-2700-megawatts.html