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Energy Crisis: Our Biggest Stumbling Block | By Abdul Waris

Energy Crisis: Our Biggest Stumbling Block | By Abdul Waris

The recent petrol crisis and its inefficient handling have raised many questions about the claims of good governance in the country.

Pakistan’s economy has been experiencing many challenges over the last decade, challenges that have actually held back its growth. Rising inflation, increased terrorism, natural catastrophes such as floods and earthquakes, political uncertainties, poor law and order and substandard infrastructure are most notable amongst them. However, the most significant is the energy crisis — gas and electricity load shedding — which has created havoc in in the lives of the people with electricity outages for 10 to 12 hours a day in many parts of the country, especially in rural areas and now even in big cities. At the same time, long outages of natural gas have coincided with the reported shortage of petrol in many cities as the government has once again slashed petrol prices on the back of falling international prices, adding five percent more tax and increasing the overall sales tax on petrol to 27 percent while, according to some estimates, the overall tax and levies come to about Rs 30 a litre.

The finance minister just stated that the government had to face a shortfall of about Rs 68 billion. It is rather unfortunate that the government has to rely on such indirect taxation to meet its revenue target, which is regressive in nature and falls more heavily on poor people. This also reflects the government’s inability to augment its direct tax receipts. The recent petrol crisis and its inefficient handling have raised many questions about the claims of good governance in the country. Although federal ministers were trying to get themselves absolved from their responsibilities, finally the petroleum minister accepted responsibility for the fiasco and volunteered to tender his resignation. Although the government has only sacked and suspended some bureaucrats, making them the scapegoats, no credible action has been taken to avert such a crisis in the near future.

Some media reports indicate that the finance ministry deliberately did not release funds to Pakistan State Oil (PSO) due to which it was unable to open a letter of credit to import oil. This was reportedly done to abide by the commitment of maintaining foreign currency reserves with the IMF to the level of $ 15 billion, which was too difficult to be achieved in the first place as huge imports of oil on the back of surging demand due to record low prices and non-availability of alternative fuel of CNG could have depleted them. However, whether this aspect will be investigated remains unclear given the power the finance minister enjoys in the present regime.

International credit rating agency Moody’s, has also warned that the country’s credit rating may again be jeopardised if it is unable to deal with the ongoing crisis, seriously denting the country’s international credibility. As far as the electricity crisis is concerned, during winters, electricity from hydro source reaches record lows due to reduced flow of water but what is more alarming is the worsening of circular debt that, according to some estimates, has reached about Rs 300 billon, halting production in many thermal power stations. Although the government has cleared the outstanding amount of this debt ever since it came to power it proved to be a short-term measure as it has risen again and is now haunting the whole economy. Since our reliance is unfortunately on this source, which is considered to be the most expensive form of electricity, the non-availability of furnace oil has actually seriously impaired our electricity generation potential. Very few people know that we have the installed capacity of 19,000 MW, which by any means is sufficient to meet even peak demand is summers but, due to many logistical problems, only 60 percent to 70 percent capacity is utilised. The main reason is circular debt, electricity theft, line losses and the obsolete system of electricity distribution, which leads to line losses.

According to experts and World Bank officials, about two percent of our economic growth is lost due to this energy crisis, which has crippled the whole economy for years now and still remains unresolved. On the other hand, there is no short-term solution for gas shortage as demand surpasses the supply greatly, which makes life miserable for domestic as well commercial users. Our planners are largely responsible for such a situation as we happen to be a country with the largest number of CNG stations and CNG vehicles in the world; we have made this precious natural resource unavailable for value addition and to fuel economic and productive activities. However, the government has planned to import LNG by the end of this year, which is likely to overcome this problem for some time as claimed by government authorities.

The present government has made many significant economic changes with economic indicators improving such as the level of foreign currency reserves, the value of our currency, significant decline in inflation rate and economic stability, which has given new heights to the stock market, clearly indicative of growing investors’ confidence, but the country, according to all estimates, has not achieved desired economic growth. The energy crisis is the biggest hurdle in its way. If the government fixes its priorities and adopts a long-term approach to tackle this issue then the desired results will vindicate its success. Only good governance can rescue any democratically elected government and help it establish its credibility and to overcome its political rivals and opposition instead of making claims on talk shows and placing advertisements in newspapers — hollow shows in the absence of any solid performance on the ground. It is hoped that this approach will be the cornerstone of the government’s policy from now onwards before it can claim any success on the economic and political fronts.

Source: http://www.dailytimes.com.pk/opinion/02-Feb-2015/energy-crisis-our-biggest-stumbling-block

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