Energy is the defining challenge facing Pakistan and our measured response will help shape the future of the economy and the well-being of our people. Energy runs machinery in factories, lights our cities and powers our vehicles, so vital for development and economic progress.
There has been an enormous increase in the demand for energy as a result of industrial development and population growth. Supply of energy is, therefore, far less than the actual demand. The result is acute problems of energy supplies. If not tackled boldly and with imagination, the energy challenge would have serious consequences for the country.
Already, the Government has initiated wide-ranging reforms in the energy sector that are aimed at increasing power generation at affordable prices. These reforms involve the entire energy chain including power generation, its distribution and transmission.
As a first step the Government has established a High-Powered Steering Committee. Headed by Minister for Water and Power Raja Pervez Ashraf, it includes Federal Minister for Finance Abdul Hafeez Sheikh, Federal Minister for Natural Resources Naveed Qamar and Deputy Chairman Planning Commission Nadeem-ul-Haq to oversee the Energy Sector Reforms.
The Pakistan Electric Power Company (PEPCO) has been entrusted the task of managing the transition from present bureaucratic structure of the energy sector to a corporate, commercially viable and productive entity in order to move in the direction of reforms.
It must be borne in mind that the present energy crisis started in 2006, when the demand overtook the supply. Since then, it has been gradually intensifying. The energy crisis has been affecting all sectors including domestic, industrial, agriculture and commercial, inflicting losses with socio-economic implication both at the macro and micro levels. It is also marked by consistent power supply deficits, massive load-shedding, resource constraints as well as political interference.
The reforms are designed to achieve financial sustainability in the energy sector by recovering the cost of electricity through rationalisation of tariff, changing the present fuel and generation mix to make electricity affordable, restructuring distribution companies and making them independent corporate entities, rehabilitation of old generation units to attain their installed capacities and their conversion from use of oil to coal as fuel.
Over 3000 MW of power generation can be added by revamping old thermal power plants. This will be a much cheaper, quicker and secure option. Under utilisation of thermal power plants had further exasperated the power situation in the country.
The reforms also lay emphasis on increasing efficiency, reduction in line losses, and zero tolerance against those involved in electricity theft. All these measures would address the consistently rising electricity prices, a serious concern for the common man.
Energy crisis is not new to Pakistan. The present crisis however, is the worst as it is intense, multi-layered and costly. The crisis, the country has plunged into is far too complex. The energy equation of Pakistan is out of balance as demand far exceeds the supply. The electricity demand is also on a steep rise due to urbanisation, modernisation and extension of grid to rural and far flung areas. With a consumer base of over 19.7 million, the energy demand reached 20,000 MW during late June and early July this year against an available generation of 15000 to 15500 MW.
Before the inception of the present Government, not much was added in terms of power generation by the previous regime. Barring WAPDA from thermal power generation and failure to come up with large hydro-power projects and growing reliance on thermal power only intensified the crisis. The circular debt, now touching Rs 400 billion, needs to be sorted out.
The circular debt is essentially the difference in the cost of price of electricity and the price recovered from the consumers. The debt can be overcome either by subsidies from the government or by a range of measures including rationalisation of tariff, decrease on dependence of furnace oil, reduction in line losses and elimination of electricity theft.
Transmission and distribution losses, which stood at 23.7 percent in August 2010 need to be curtailed. A substantial amount of over 1000MW of electricity can also be saved by implementing meaningful energy conservation and management programme.
The long-term resolution of Pakistan`s energy crisis lies on reliance on indigenous energy resources, like hydro-power, coal, wind, solar energy. Estimates suggest that the total identified potential for hydel power is around 40,000MW of which only 6400MW has been exploited so far.
Coal is a key player in the energy market. South Africa, Poland and China respectively produce 93 percent and 81 percent of the electricity from the coal. The total coal reserves of Pakistan are estimated to be around 185 billion tonnes. Coal reserves in the country for power generation are virtually untapped. Coal can help Pakistan turnaround from its current position of energy deficiency to energy prosperity.
Nature has gifted Pakistan with a lot of resources. It is up to us to utilise these resources and channel them to our benefit. It will take time but it is doable. With the support of the government and the necessary political will, we can overcome this energy crisis as we have the expertise, manpower and the right strategy. What is needed is for everyone concerned to put his shoulder to the wheel.
The writer is PEPCO managing director
