Energy sector and political will

Such is the gravity of energy crisis in Pakistan that the presentation of Economic Survey 2012-13 got delayed by a couple of hours as the country’s economic managers were busy discussing ways to get out of the energy sector mess. It is heartening to see the government is realising the extent of the problem, which is believed to have cost 2 percent to the country’s GDP in FY13.
Pakistan’s net energy supply grew by a negligible 0.3 percent year-on-year during FY13, which reflects well on its GDP growth. The survey correctly points out at the strong correlation between GDP and energy consumption.
The survey numbers reveal a 6 percent year-on-year increase in natural gas consumption, as gas supply during the period improved owing to better pricing policy and new discoveries. That said, there is a disturbing trend in gas consumption as the share of domestic consumption continues to rise and has reached 23.2 percent of the total from 16 percent in FY08.
The reason why domestic gas consumption is not the ideal use of gas is known to one and all, but little has been done to address the issue. Domestic gas prices continue to be at steep discount to other fuel – incentive enough for the abuse of precious resource at throwaway rates.
Another disturbing fact is the 12 percent year-on-year decline in feedstock gas consumption by the fertiliser sector. Fertiliser gas consumption has declined three years in a row which does not only impact LSM production, but also inflates the import bill in the form of imported urea. Massive gas curtailment seems to be the new norm for the fertiliser sector – an unhealthy sign for an agri-heavy economy.
The power sector’s share in gas consumption has come down to 27.5 percent from the highs of 40 percent in the Musharraf era. This simply means a poor energy mix tilted towards furnace oil, delayed imports, inflated tariffs, inability to pass-on the impact to the end consumer – and hence the circular debt that the new government so often talks about.
The survey presents a table showing installed capacity additions to the grid over the years – and it turns out that there were 3,300 MW added in the past for years – more than double than what was added in Musharraf era.
Yet, additional megawatts could not translate into economic growth, as the chronic issues of fuel supply, circular debt, collection inefficiencies ensured the optimum capacity is never reached. This asserts the view that adding more megawatts to the grids isn’t what is required at the moment – running the existing ones effectively, is.
The economic survey does not reveal anything that is not known to those at the helm. Enough has been said and written about how to deal with the energy crisis and the solutions are well-known. It will eventually be the political will that will decide if the country stays in this mess or goes out of it. Keep an eye on the power sector subsidy allocation in today’s budget speech – it will give a good indication whether the political will is there or not.