An unrelenting power crisis is adding to Pakistan’s woes. Power shortage has hit Punjab the hardest, shutting down industrial units and market places for days together and bringing people out on to the streets. Major towns in Punjab have been witnessing violent protests over power shortages since March. In many areas, the outages last 18 to 22 hours on a regular basis.
The crisis, a repeat of last year’s, is triggered by the widening gap between demand and supply. Official figures put the shortage at 6 million kilowatts, about 50 percent of the total power demand. This shortage is attributed to decreased power generation capacity and increased power demand in summer.
Of the several factors responsible for the shortfall in power generation, the most critical is the problem of circular debt. Pakistan’s excess reliance on thermal energy-36 per cent--triggers this cycle of debt. Besides thermal, Pakistan’s energy mix has 36 per cent hydel, about 25 per cent gas and three per cent nuclear. It is thus clear that the cost of electricity is directly influenced by the global oil prices. Since the average crude prices (OPEC) have remained $112 per barrel during the last nine months, the per unit cost of electricity have remained quite high. Saddled with such high unit costs, and a surge in power thefts, the power generation companies have been unable to recover their cost of production and in turn failing to clear their dues to Pakistan State Oil (PSO). As PSO buys oil from refineries for distribution, and refineries rely on Oil and Gas Development Corporation (OGDC) and Pakistan Petroleum (PPL) for the supply of crude, expanding the cycle of debt. With debts mounting, the power generating companies are forced either to reduce generation or shut down operations.
What has further magnified the power shortage is the shrinking volume of water in the rivers, causing a drastic fall in hydropower generation. The estimates of the gap are anywhere between 700 to 800 MW.
The power crisis has had a serious impact on Pakistan’s economy last year. It is estimated that at least 2 per cent of the GDP growth was lost due to the power shortage. The agriculture growth fell to 3 per cent from 5 and the export-oriented manufacturing sector, particularly leather and garments, was crippled by lack of regular power supplies. The current crisis is likely to pin down the GDP growth projections for the current year.
With no short-term solutions in sight, the government has turned to foreign suppliers for help. Iran, which contributes 72 MW power, is likely to supply 1100 MW. India has promised another 500 MW. Another 1000 MW is set to be purchased from Tajikistan. In fact, Pakistan has mooted buying surplus power from other Central Asian Republics as well. Although India, Iran and Tajikistan have promised to help Pakistan, there are problems that hinder a quick solution.
Vinesh Kaushik is Research Intern, ORF
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