Exceedingly higher energy requirements and relatively scarce resources is a global challenge, threatening the credibility of governments and eroding the very basis of nation-states, at present. Pakistan is among the many states facing instability in the energy sector, which is now becoming a political issue. The gravity of the crisis has affected almost every domain of human life, greatly.
As every problem comes with a solution, so is "the energy-crisis", though the solution lies in accurate diagnosis of the crisis, suggesting viable prescription and remedies to the core issue afterwards.
For some time, energy disruptions/outages have exceeded 18-hours a day. And at other times, every thing starts functioning normally. The electricity crisis, thus, looks: "Normally abnormal and abnormally normal". During October 2011, the frequency of public protests, rampages by rebellious mobs was on the rise, which has vanished because shortfall in supply remains no more a problem. Why does this happen? Where does the fault lie? Hidden inside is the untold story which must be known to every tax-payer. At this stage, a cardinal dilemma presently dominating the energy sector stems from payment or non-payment of circular debt to the energy producers, which now exceeds Rs 680 billion and could reach Rs 734 billion next financial year owing to interest. In 2007, the circular debt was Rs 400 billion while annual interest on it was Rs 35 billion. As such, this year the government shall have to pay Rs 54.4 billion as interest. Since 2007, the government had either failed to pay the interest or made an addition in the circular debt as it now exceeds Rs 400 billion to Rs 680 billion from 2007 to 2011, respectively.
Generally, when the government pays back the circular debt, the private companies start producing electricity fuelling our houses, streets and markets and energizing factories. Similarly, when the government defaults in payment, the companies switch off their units, putting our nightlife in the dark and making our life dysfunctional in the day. Amazingly, certain man-made disasters created from greed and self-pursuit stand between the game of hide and seek, payment or default, operation or non-operation of power-stations, which is neither debated nor disclosed the way it should have been to the people. As is the case all over the world, energy producers/tycoons reached Pakistan with risk-free huge return of their investment, which is against even the basics of Adam Smith - a widely projected thinker of the free-market economy. The cardinal theme dominating the agreement between the energy producers and the state of Pakistan was to ensure all time profits to the private energy generators. Firstly, it was prime responsibility of Pakistan's government to maintain constant oil supply to the IPPs, no matter whatever circumstances prevails in the international market. If the government fails to supply oil due to internal or external crisis and the private companies close down their units, the government will have to bear the non-operational cost. Second, the most perilous contractual provision to the national interest and also in violation of the norms of free-market principles, was that if the companies starts their fuller energy production capacity which is above the domestic energy requirements, the government shall have to essentially buy energy from the private companies; even if it means closing down public sector energy units or hydel projects. In either case, the private companies are the winners and the government the loser, thus, the nation, the taxpayers, the common m
Owing to the unilateral profiteering gimmicks, vital resistance at the global level increases against privatisation of the electricity sector because it serves the individual motives of big stakeholders and failure upon the part of state enterprises to effectively manage the system which was resulted in a public-private partnership of a peculiar nature. Violating every law of the free-market economy as well as the command system this pattern has emerged as a "Crisis Aggravator", so the mother of the crisis.
The government, instead of addressing the issue directly, has initiated several high-budget electricity generation projects. Circular debt along with these planned projects is likely to account for around 41.7% of the fiscal budget. However, accumulated circular debt up till 2011 is 26.4% of the total budget of the fiscal year 2010-11. For instance, the total fiscal budgetary allocation is Rs 2574 billion while circular debt has now reached Rs 680 billion, which could substantially increase, annually. Under severe financial constraints and ever-increasing fiscal deficit the electricity crisis is not only hindering the daily life of the citizens but also endangering the future living standards of the country as the PSDP in the above-mentioned period stood as low as 24% of the total budget. Hence, the nation has to compromise upon health, education, and the general well-being, on one hand, which will further deteriorate if the circular debt persists in the coming years, on the other hand. The way forward, even under free-market principles, is to revisit the contractual provisions, which are shifting constantly the financial burden on the state and ultimately to the consumers.