Summer of 2018

With all the difficulties PMLN is facing in the aftermath of Panama papers, the popularity has remained resilient. The one variable that can really dent the popularity, as election approaches, is the reemergence of electricity load shedding in summers this year. And not any other summers, these will be the election year summers.

The question is would there be any load shedding, especially in urban Punjab. For this the need is to find what scheduled or unscheduled power outages are a function of. The first thing comes in mind is the capacity to generate power. There is absolutely no issue on this front. The one thing the PMLN government has done (or rather overdone) is enhancing the power generation capacity and even the incremental generation is more efficient than the existing base load.

The generation capacity has increased in FY17 to reach at 25,982 MW. And another 5,111 MW is coming online in FY18 to take the total generation capacity north of 31,000 MW. Mind you, when the current government came in power the capacity was 22,512 MW.

In terms of capacity addition, the government has delivered; but people would gauge it from the power they get and not the capacity. There is minimal load shedding at present, and could be one of the reasons why the popularity is still intact. But power generation in peak season is merely not a function of capacity; other variables such as fiscal and external imbalances also come into play.

Remember, the summer of 2012 (last season prior to 2013 elections); the electricity outage was at its worst. And soon, after the PMLN government came in power, the summer of 2013 was much better - the outage reduced from 12-14 hours to 8-10 hours without any capacity addition.

The electricity generation increased from 96000 GWH in FY13 to 104000 GWH in FY14, and it virtually remained flat in subsequent two years (FY15-16) before it really started going up in FY17. The increase in FY17 is due to capacity enhancement while the jump in FY14 was due to clearance of circular debt.

The first thing Dar did after assuming the power is to clear the circular debt amounting to Rs480 billion and that provided adequate fiscal space for government to generate electricity from the capacity that had remained idle in FY11-13. The financial cleansing in FY14, though booked in FY13, provided the fiscal space to enhance generation.

Now in FY17, external payments related to capacity expansion, fuel imports for enhanced generation and its wide positive impact on overall economy, have put a significant dent on both current account and fiscal balances. And today, the imbalances are not much different from 2013.

The circular debt has again reached around Rs400-450 billion. The current account deficit is around 4.5-5 percent of GDP and the biggest challenge the economy has in the short term is to finance the growing deficit. And the other challenge is to clear the circular debt for adequate power generation.

But the government simply does not have capacity to do so. The existing government may not let power outages to reach too high till the time they are in office. But how the interim setup deals with an emerging crisis remains unknown.

Should the PMLN have a grip on the interim set up, they may prolong the handling of crisis till elections. However, if Senate elections are anything to reckon with, the interim government would be at best impartial, and at worst, against PMLN. There is a strong case of acute power shortages or high load shedding as the election approaches. This could sway marginalized voter from PMLN. Had the government worked on reducing transmission and distribution losses, situation could have been different. Had capacity been added in a more structured and well thought out manner, the import bill would have been lower to partially ease the external pressure.