Pakistan Observer

Energy crisis: Failure of political will

Rizwan Ghani

Tuesday, April 10, 2012 - It is a failure of political will that Gilani is holding a national conference on energy after four years in power. The government should have taken care of the energy issue in its first six months in power. There is little hope that Gilani can resolve the crisis keeping in view the details of government’s plans in the media. Sometime back Zardari’s also tried to solve the crisis, but the situation has gone from bad to worse. The chronic electricity shortage in last four years has left millions unemployed. The small and medium businesses employing daily wage labor has been worst hit due to the shortage, and it has caused irreparable loss to the economy and many manufacturers have left the country. The government was aware of the energy crisis when it came into power. Repeated promises and timelines to overcome acute shortages show that government was aware of the severity of the situation. Why the government opted to look the other way? The answer lies in the Supreme Court’s landmark judgment on Rental Power case. It has exposed mega corruption in the energy sector, criminality of all concerned and the failures of energy distribution companies. Government needs to take following steps to produce surplus electricity, cut electricity and fuel prices, cut fuel imports and allied inflation.

Electricity should be returned to Wapda to reduce the cost of electricity and end circular debt permanetly. The government’s failure to control corruption is no excuse of privatization. The energy sector profits being taken from Pakistan show that corruption was used to benefit individuals. Report in UK have shown that setup privatization costs the state 16 times more than what it cost in the public sector. A British telecom firm in India is facing tax evasion charges of 11,000 crore rupees. Imagine the earnings of the company. In Pakistan, privatization of energy sector has failed to cut line losses, improve efficiency, reduce electricity prices, end corruption, and produce surplus electricity. The deregulation of electricity sector has turned Pakistan hostage to energy mafia. The cost of per unit electricity has gone up by 30 percent due to top-heavy management, exorbitant salaries and free electricity. Reportedly, there are more than 300 management posts in KESC as compared to three before privatization. PEPCO has not been abolished despite announcement in March, 2011 (April 3, local news). Government should nationalize energy sector, disband distribution companies and return electricity under Wapda to start using installed generation capacity, cut overhead costs and bring down energy prices by 30 percent.

Renewables are the future. Dams and coal is history. China took over global solar panel market. It impressed advanced world (American Decline part 1 Feb.14). China has developed 6.5 GW windmills and a world leader in wind energy (40GW). Islamabad should use the surplus capacity of China’s wind industry and solar energy to overcome the electricity shortfall in next six to 12 months. The availability of transparent solar cell and concentrated photovoltaic systems (CPS) can help double the solar efficiency. Pak-China has already signed 4300 MW in Sindh with coal and renewables. India is producing 15,000 MW with wind. Pakistan needs to catch up fast (Chinese companies to invest $10bn in Sindh (local news, Nov. 24, 2011). Punjab needs to adopt renewable on war footing to sustain local economy “Moving to a green economy will create 60 million job opportunities until 2020 in the Middle East (March 11, Arab News). Saudi Arabia is part of the process to implement a green economy strategy to ensure sustainable development. Pakistan can also generate millions of jobs in immediate term. Favorable policies can help delink energy prices from international market. The adoption of renewable energy will free domestic consumer from changes in international fuel prices and resultant increase in electric and gas prices. Many countries in the world, advanced and developing, such as Britain and Bangladesh, have formed policies to allow individuals transfer to renewable. It includes long-term bank loans, tax credits and return of debt through monthly installments to the bank instead of paying electricity bills. Instead of collecting Rs. 160bn circular debt through surcharge, the government should formulate a comprehensive transfer to renewable energy policy. The banks should give flexible schemes for transition to alternate energy. Government should give tax incentives to the importers, investors and the users. Five year zero tax for all can help Pakistan embrace green energy. Furthermore, the government should encourage use of reverse meters and grid contributions on line of US and Europe. It allows the consumers to sell excess energy back to the government. It will help cut reduce pollution, political fallout and corruption in energy sector.

It is vital to shift industrial sector on renewable to fight poverty. During Musharraf regime, the laws were changed to facilitate the mega industries including energy sector on the pretext of using cheap gas to provide relief to public and consumers. But by linking the local energy prices to international prices and withdrawing subsidy the entire balance was shifted in favor of the industrialists and the energy mafia. The multi-nationals and the major industry has failed to follow the agreement of using renewable energy for three months in a year and shift to renewable in five years. They have enjoyed cheap gas at the cost of the public welfare and the domestic sector. The business community has become so strong that it is nearly impossible to enforce adoption of renewables and withdraw gas to facilitate the public. It must be highlighted that 90 percent of country population is living below $2 a day. The powerful business community has got the law of minimum salary passed to their advantage. It violates union law of the country allowing workers to negotiate their wages and fails to review their salaries according to the inflation and currency devaluation. This profiteering must end to help fight poverty in workers and laborers.

Train is must to fight poverty and inflation. Train is the established way of fighting poverty and inflation. It allows people to move freely, hire cheap accommodation away from city centers and avail benefits like healthcare, education and employment through daily commuting to work and back. Train services impact many fields positively like reduction in crime rate because the travelling population leave cities after working hours, it reduces pressure on city infrastructure and services. It cuts cost of living. Reliable train service across Pakistan and within cities can cut monthly $1.2bn fuel import bill by sixty percent. Eighty percent of our imported fuel is diesel. The shift to trains will cut the fuel import. The $12 bn annual overseas remittances are nullified by the same amount of fuel imports. If our fuel import is brought down to $5bn it will reduce inflation accordingly. It will delink commodity prices, travelling and allied costs with energy prices. India did not allow increase in railway ticket prices to facilitate poor people. India’s railway minister had to resign. Therefore, reliable railway service can help reduce poverty manifold.

Pakistan should use dams for irrigation only. The scarcity of water is going to be a challenge in coming times. The shift to renewable energy will help avert inter-provincial water standoffs. It will allow to make more land arable in across Pakistan. The use of renewable energy will allow desalination of seawater because it will become economical. China has brought down renewable energy prices equal to coal. The development of irrigation dams and shift to renewable energy will allow Pakistan to store rainwater in irrigation dams and get rid of energy dams. Thus, the solution to energy crisis lies in political will because technology and support is already there.
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