The energy sector will make or break Pakistan’s economy. And circular debt will make or break Pakistan’s energy sector. In August 2018, when the new government was formed, the accumulated stock of circular debt stood at Rs1.14 trillion. Red alert: By January 2019, the same had swollen to Rs1.4 trillion – an increase of Rs260 billion in 137 days or Rs1,897 million a day every day. Imagine: Rs1.4 trillion is $10 billion – compare that to $3 billion that we recently borrowed from Saudi Arabia.
Reforming the energy sector will make or break Pakistan’s energy sector. Yes, reforming the energy sector will make or break Pakistan’s economy. Yes, Pakistan’s economy will make or break 208 million Pakistanis. To be certain, reforming the energy sector will result in potential losers and potential gainers. The potential losers will be independent power producers (IPPs) and the potential gainers will be 208 million Pakistanis.
Red alert: As long as the potential losers are also the so-called ‘reformers’ Pakistan’s energy sector will not be reformed. Once again, Pakistan’s energy sector will not be reformed for as long as the potential losers are also the so-called ‘reformers’. In essence, the game is all about 30 IPPs versus 208 million Pakistanis. Let’s see who wins.
The ground reality is that 30 IPPs are holding Pakistan’s economy hostage. Yes, 30 IPPs are holding 208 million Pakistanis hostage. According to Shahid Sattar, a noted expert in the field, “the energy tariffs in Pakistan are now one of the most expensive in the world”.
In Pakistan, the solar-based “first 10-year tariff rates are from 18 to 19 cents/kWh”. In India, the “solar tariff is between 7-8 cents”. In Pakistan, “wind-power projects have been given Rs15.322/kWh levelised… current worldwide wind power tariffs are as low as 2.6 cents/kWh; world average tariffs are around 6-7 cents/kWh”.
Port Qasim and Sahiwal coal-fired power plants are “getting a tariff of 8.36 cents/kWh and 9.16 cents/kWh, respectively.” India’s Mundra Ultra Power Coal Project “is far cheaper than Pakistani plants on a tariff rate of Indian Rs2.64/kWh”. According to Shahid Sattar, “over-payments to these two projects are estimated to be $475 million per annum and over the life of the plants will be more than $14.25 billion.”
Once again, the energy sector will make or break Pakistan’s economy. And, Pakistan’s economy will make or break 208 million Pakistanis – that’s how important energy-sector reforms really are. As of today, there is “over-capacity in power [and] exorbitant tariff rates which render energy unaffordable”.
The Energy Task Force is into its fifth month during which the circular debt has gone up by a hefty Rs260 billion. Any reforms in sight? Pricing reforms? Governance reforms? System efficiency?
The one thing that will make or break the PTI government’s economic policy is circular debt. I must repeat: Pakistan’s energy sector will not be reformed for as long as the potential losers of the reform effort are also the so-called ‘reformers’. Once again, the game is all about 30 IPPs versus 208 million Pakistanis. Red alert: The 30 IPPs are organised, 208 million Pakistanis are not. Let’s see who wins.
The writer is a columnist based in Islamabad.
Email: farrukh15@hotmail.com Twitter: @saleemfarrukh
