ENERGY is practically the lifeblood of any nation in the modern world. Adequate, affordable and reliable energy supply is a pre-requisite for economic as well as social development. Subsequent governments have failed the nation in this important respect, too. Wrong policies over the last many decades have landed us in the tight corner we are sulking in today.

Fossil fuels, like oil, gas and coal, are the current mode of power generation despite the fact that we have always had huge untapped potential of renewable sources at our disposal, including hydro, solar and wind power. Developing these requires substantial investment, but is worthwhile as they provide inexpensive energy for decades to come.

The capital expenditure requirement in the domain of fossil fuels is relatively less and its gestation period is much shorter. But the generation cost per unit is far too high compared to renewable sources where it is insignificant.

It is also volatile as exchange rate parity variations are an important factor. Imported fuel, both oil and gas, is wholly dollar-based, and local production is also partially dollar-based because foreign investment is involved in exploration and production. And for that reason, more often than not, product pricing is dollar-based. Thus, it is exposed to the vagaries of dollar parity. In short, it is far costlier per unit of energy compared to the renewable sources.

The correct policy prescription in this scenario was a judicious mix of the two sources with long-term stability and prosperity in mind. However, for about five decades, the focus has been on short gestation, high-cost, fossil fuel-based projects. This short-vision approach, pursued for reasons not too hard to guess, has landed us in the present disastrous predicament.

We are a country chronically facing budget deficit as well as balance of payment (dollar) deficit. We simply could not go too far with costly power. Our industry and bulk of the residential users have to be subsidised to keep things moving. That has created an unmanageable circular debt.

Currently, our energy mix is 64 per cent fossil fuels, 27pc hydro and 9pc nuclear plus other renewable sources, like solar, wind, etc. This, obviously, is totally unsustainable and at policy level resources have to be found and allocated to renewable power projects.

For reasons of grossly faulty, short-term policy approaches over the decades, the dollar is expensive for us. Today, for reasons beyond our control, the dollar price of fossil fuels has shot up in the world. Resultantly, we are in a logjam of dollar-based production along with rising oil prices in the world and weakening rupee building pressure on the fuel prices, leading to discontent and public pressure.

There should be greater realisation of the critical importance of efficient energy use as well as management, keeping in mind the galloping increase in population.

Declaration of energy conservation should be a national objective and laying down formal guidelines in this regard is essential. A high-powered National Energy Policy Council should be formed, to be chaired by the prime minister himself, is essential in addition to having regular national energy budget-making exercises.

Energy pricing should be based on economic value reflecting the true cost of supply and subsidies directly from the national exchequer rather than at the cost of a group of consumers. Come to think of it, afforestation, too, can be a potentially critical factor in this regard.

M.H. Asif
Karachi

Published in Dawn, October 29th, 2021