ISLAMABAD: In the past 12 years, the government spent Rs1.7 trillion as subsidy to power sector – an amount which is much higher than the cost of constructing the Diamer-Basha dam, estimates the Pakistan Economic Survey 2013-14 released on Monday.

The survey however also notes that withdrawing the subsidy at once may cause huge socio-economic cost and therefore the present government is trying to rationalise the tariff and move towards cheaper energy mix for energy supplies especially for electricity generation.

According to the survey, one reason of energy crises is expensive input. It warns that if timely efforts are not made for cheaper energy mix, the problem can become more severe in future.

At the same time, the survey says the government is committed to achieve less oil dependent power generation mix through development of indigenous energy resources particularly hydro and coal.

It is expected that with ongoing efforts of both federal and provincial governments, the share of coal in primary energy supply will increase and will lead to cheaper energy mix which when use in electricity generation will reduce the cost, survey notes.

When an additional 16,564MW power generation will be added in the national grid system through various sources by completing new projects, load shedding will be reduced or eliminated by 2018. There was a decline in the share of electricity in energy supply as it declined from 15.5 per cent in 1995 to 12.9pc in 2013, survey says.

The survey held Discos responsible for their inefficiency in the power generation stage when the main power distributing companies do not perform well in terms of transmission and distribution losses.

The National Electric Power Regulatory Authority (Nepra) recommends a tariff structure with incentives to efficient Discos and punishment to inefficient ones in order to reduce their respective transmission and distribution losses.

However, the unified tariff structure notified by the government disallows this incentive and as a result the combined losses of the inefficient Discos have to be borne by the federal government.

In short, electricity generation became over expensive due to costly input and transmission and distribution losses.

The survey says that natural gas and LPG are considered as cheaper than oil but both are expensive than coal.

Fortunately Pakistan has huge coal resources estimated to exceed 185 billion tonnes which generally ranks from lignite to sub-bituminous. However, less focus has been given to this cheaper energy supply, the survey notes.

During 2013-14 energy consumption was 40,185 million TOEs compared to 40,026 million TOEs in 2012-13 showing a growth of 0.4pc.

The current fiscal year has witnessed so far, much improvement in economic activity due to better available energy for usage on account of relatively less losses in transformation and distribution as compared to last year.

In case of agricultural sector, electricity consumption decreased from 15pc in 1993 to 10pc in 2013 which reflect the structural transformation away from agriculture sector to industrial and services sector.

Transport and power sectors remained the highest sector in the usage of oil and petroleum products.

The share of fertiliser industry in gas consumption increased to 19pc, which was 15pc in corresponding period last year.

Published in Dawn, June 3rd, 2014