Energy: More needs to be done!

The government is working tirelessly to ensure such problems are remedied reads the Economic Survey 2011-12 on the issue of the energy crisis. The masses can be excused for not feeling the impact though as the Finance Minister in his press conference, acknowledging the existence of energy crisis, shied away from the root cause and habitually blamed the previous governments failure as the core reason for the mess.
The Minister rued the missed opportunity of adding more power generation capacities, when in fact the current government itself has commendably added nearly 3,400 MW to the grid. But, capacity is not the problem, efficiency is. The existing capacity more than meets the countrys peak demand, but the plants are either obsolete or the power sector is engulfed in the horrible circular debt chain, at any given time.
The Survey highlights the loopholes in the energy sector as the power generation mix continues to worsen. The provincial numbers state that thermal power generations share has reached up to 67 percent of the total, out of which 40 percent is furnace oil-based electricity generation. Needless to say, it results in higher tariffs and further augments the circular debt stock.
On the reforms side, most of the points mentioned are limited to chalking plans and policies with little to no work on the ground. Ironically, the Survey does not put enough emphasis on the gas shortage in the country, and seems heavily biased towards just the electricity crisis.
The document claims that the gas supply to KESC has been increased to ensure maximum supply, which seems a rather optimistic claim as KESC has been long complaining of not receiving the promised amount of gas for power generation. The acute gas shortage severely dented the industrial production activity as evident by less than projected LSM growth and even lesser gas for power generation.
The Finance Minster lauded his Government for massive urea imports terming them a measure for enhancing food security. However the fact remains that extended gas curtailment to the local fertilizer manufacturers limited their production to 82 percent of capacity during the fiscal year, inflating the import bill and hurting industrial production. There was not a word on prioritization of gas, and the 10.8 percent increase in CNG consumption during 9MFY12 leaves a sour taste.
The T&D losses too, continued to remain on the higher side, with a negligible decline of 3 percentage points, recorded at 19.5 percent. This leaves a lot to be desired as hefty T&D losses to already inefficient power plants, in a low recovery environment, only add fuel to the fire.
There is some silver lining to the energy cloud though, for which the government deserves a pat on its back and that, is the tremendous improvement in keeping the power sector subsidy within the budgeted limits. The provisional numbers are heartening and should the government keep with its projection of Rs125 billion subsidies for the fiscal year, it will have done a superb job - unprecedented in the recent past. Recall that power sector subsidies have been massively overrun in the past two years, totalling Rs343 billion and Rs180 billion in FY11 and FY10 respectively.
The reduction in inter-disco tariff differential has been possible on the back of partial rationalisation of power tariffs and the monthly fuel price adjustment mechanism, which may be unpopular among the masses but is the rational thing to do. The government now needs to address the more challenging issues of resurrecting the ailing power units and improving the mix, without which energy security will remain an elusive dream.