Pakistan’s energy shortages disrupt daily life in the country, and protests and demonstrations against the shortages often turn violent, creating a risk that Pakistan’s energy crisis could threaten peace and stability. Incorporating official and donor perspectives, this report examines the factors in Pakistan’s energy crisis and what can be done to address it.

Summary

  • Pakistan is currently facing a severe and multifaceted energy crisis. Electricity shortages exceeded 7,000 megawatts in 2011; the gas shortfall is 2 billion cubic feet per day. The energy shortages are estimated to cost around 2 percent of GDP annually. This shortfall is the result of the failure, over successive governments’ tenures, to invest enough to expand power system capacity. Low and declining investment and savings rates (including in power) reflect macroeconomic weaknesses.
  • Successive governments have set tariffs on electric utilities below cost recovery levels. The difference is paid as subsidy, which is unaffordable and diverts resources from other priorities. With utilities unable to cover their costs of production, investment has lagged.
  • The efficiency of Pakistan’s utilities—both in producing electricity and collecting dues—varies considerably. Some companies compare with the best in South Asia. Others do not achieve half those performance levels. Supply costs thus remain higher than warranted.
  • The current government plans to address the financial constraint and has raised tariffs. Further increases are required but will prove politically challenging. The record on past governments’ efforts in the sector is mixed. Utility managers are not held accountable for their companies’ performances, and there is continued interference in the utilities’ affairs. Prosecution of power theft remains weak.
  • The 2013 power policy includes an ambitious agenda to increase generation, raise tariffs, and improve efficiency. Private expertise, finances, and management will be mobilized. Some donors support the government’s efforts. Experiences in other countries, especially India, may provide lessons for Pakistan.
  • The reform agenda faces opposition, but the government must stick to it. Contributions from all stakeholders—consumers, investors, financiers and donors, media, and civil society—are essential if the challenges are to be overcome.

About the Report

Pakistan’s energy shortages have a disruptive effect on daily life, and protests and demonstrations against such shortages often turn violent. There is a risk that energy shortages could erode peace and stability in the country. Following an invitation from USIP, the authors have worked jointly to achieve a balanced analysis, reflecting official viewpoints and donor perspectives on the nature of Pakistan’s energy crisis and what can be done to address it.

About the Authors

Rashid Aziz worked for twenty-five years as senior energy specialist in the World Bank’s Islamabad Office. He contributed to the Bank’s energy sector work program, which covered electricity, oil, and gas sectors. He participated in preparing sector reports; project appraisal, implementation, and evaluation documents; and policy analysis and implementation. An economist by training, Aziz joined the Islamabad Office’s economic team in 1982 and moved to the South Asia Energy Unit in 1989. Munawar Baseer Ahmad has extensive experience in Pakistan’s energy sector. He held senior positions in the public sector, including managing director of Sui Southern Gas Company and of Pakistan Electric Power Company. An engineer by background, Ahmad is currently the chief executive of EMR-Consult (Pvt) Ltd., a consulting firm that provides high-level advisory services to private/public sector clients on policy matters and all aspects of project preparation, financing, and evaluation.

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