THE growing menace of load-shedding, combined with constantly rising electricity tariffs is mushrooming into a grave national crisis. Unless immediate remedial measures and initiatives are launched on a war footing, the crisis already leading to widespread street agitation, could virtually destabilise the government.

The finance minister, Naveed Qamar, in his budget speech on June 11, 2008, said “Conservation in electricity use, revamping and efficient use of installed capacity, will make available 1500 MW of additional electricity. We assure the nation that by taking these measures, load-shedding will be substantially reduced. While textile industry will have continuous round the clock supply, flour and ghee mills will have 18 hours of supply. Agricultural tube-wells will have continuous power supply for 10 hours at a stretch every night to avail reduced tariff.”

The actual situation on the ground instead of improving has become much worse in the past four months. The electricity demand-supply gap has gone up from 3,500 MW in March 2008 to 5,000 MW in October 2008. Load-shedding has increased from six to eight hours in a day to 12 to 18 hours, and 20 hours in rural areas. The ordinary consumers have been suffering and the economy is affected badly.

Industrial units which do not have their own generating capacity are closing down by the thousands. In fact most of the enterprises cannot operate economically when power is available for only a few hours in a day. Thousands of workers have been laid off in the face of high food prices, unprecedented inflation and growing unemployment. This will also have a very negative impact on the country`s exports which are needed desperately to overcome the financial crisis.

Electricity constitutes one of the most important components of infrastructure and plays a vital role in national progress and economic development. Still, today in this most modern and developed age, per capita energy consumption in Pakistan is only 15 MBTU compared to 54 in China, 104 in Malaysia and 106 in Iran.

Pakistan had a trade deficit roughly equivalent to 9.34 per cent of its GDP in 2007-08. Most troublesome among its imports are oil and food, whose prices soared in 2008 and only recently began to come down. The country`s oil import jumped by about 56 per cent in fiscal 2008, and the food import bill rose by about 46 per cent. It cannot therefore meet its future electricity demand by increasing its dependence on imported furnace oil.

The causes of the energy crisis are listed below.

a) The basic cause is the utter failure of the Musharraf government to increase the supply of electricity to keep pace with the growing demand. While the installed generation capacity had increased by 53 per cent between 1994 and 1999 (from 11,320 MW to 17,400 MW), it increased by only 12 per cent between 1999 and 2007, to 19,420 MW. Even that marginal increase was due to the completion of Ghazi Barotha Project started in the 1990s, before Gen Musharraf took over.

b) While the failure to increase the generating capacity is a major cause, an equally serious factor is the under-utilisation of existing generating capacity. The availability of hydel electricity naturally goes down in winter months by 60 per cent from 6,400 MW to about 2,500 MW, but unfortunately,

the actual generation of electricity from thermal plants has also declined by 4,000 MW against the installed capacity of 13,000 MW, thus raising the demand — supply gap to 5000 MW

c) One of the main reasons for the serious shortfall in the generation of thermal electricity is the problem of the “circular debt” which the present government inherited from the previous regime. In 2007, the government did not compensate the power companies for the subsidy that was being provided to consumers. The power companies in turn could not pay the oil and gas companies, reducing their liquidity to import the furnace oil that was needed to generate electricity.

The interim government, before the elections, in fact, forced the commercial banks to lend Rs34bn to the oil companies whose credit limits were already exhausted. This problem of “circular debt” became more serious in the summer of 2008, as petroleum prices jumped from $100 to $147 a barrel. It is really surprising that this problem has become the main cause of increasing load-shedding but has not so far been addressed on a priority basis.

d) In addition to these factors, there are other more chronic factors that have been contributing to the energy crisis. These include

— Very heavy line losses in transmission and distribution because of old and poorly maintained transmission systems, estimated at over 20 per cent compared to eight to 10 per cent in other countries.

— Large scale theft of electricity as clearly revealed by the growing difference between units generated or purchased and those paid for.

— Wastage of energy by the industry which consumes 30 per cent of total electricity due to less efficient systems and other practices. For example, the Chinese consume 30 per cent less electricity in textile mills because they use water partially heated by solar panels in their boilers.

— Overuse of energy by the transport sector (consuming 28 per cent of total energy) due to old and poorly tuned engines.

— Domestic and household consumption which uses 45 per cent of total electricity also depicts wasteful and unnecessary uses of lights, air-conditioners and large-scale illuminations on different occasions.

The problems outlined above reveal many structural flaws in our energy system. These include over-dependence on imported energy, inadequate political will, limited financial support and very weak implementation capacity.

Any short-term or medium-term plans to achieve energy will have to address them in a holistic manner, keeping in view the following specific objectives a) urgent measures to utilise existing generation capacity to overcome the menace of load-shedding; b) modernise Wapda and Gencos` power plants on a fast track basis to augment supplies and reduce the cost of generation; c) upgrade and modernise the transmission system to reduce losses; d) restore the hydel thermal mix in electricity generation from 3070 to at least 5050 in the next five years; e) take all possible conservation and other measures to expand renewable energy and bring down the price of electricity; f) greatly improve the implementation capacity of all the concerned organisations as early as possible. A fuller discussion of these will appear tomorrow.

To be concluded

The writer is a former finance minister.