Energy Crisis In Pakistan Essay 2012 Jeep

SUMMER in the plains of Pakistan is excruciating enough without the added joy of 20 hours of power cuts a day. Earlier this month protesters in several towns in Punjab, Pakistan's wealthiest province, smashed windscreens, blocked motorways, shut down markets and set fire to the offices of parliamentarians and an electric utility. They clashed with police who brought out handcuffs and tear gas and fired live rounds in the air.

It was a reaction to electricity shortages that had plunged parts of the province into darkness and scorching heat. At one point the gap between supply and demand hit 7,500 megawatts (MW), or nearly 40% of national demand.  

Under the current government, the power sector has neared the top of a list of security, political and foreign-policy problems that includes some heavyweight contenders. Last week's confluence of events once again underlined how easily Pakistan's power sector can slip into collapse. The system's many weaknesses find it all too easy to conspire. Cool weather in the north meant a reduced flow of hydroelectricity. Demand shot up as summer temperatures further south soared into the forties and air-conditioners strained to keep pace.

Meanwhile, several private power producers had to halt or slash production because the state-run power purchasing company hadn't paid them. They had not been able, because the biggest consumers (especially provincial and federal governments) had not paid their own electricity bills. The bills that were paid are not enough to cover the cost of generation.

This so-called “circular debt”, currently about $880m, is an ongoing problem. The government usually bites the bullet, as it did this time, by paying off a portion when power producers are about to sue for default, enabling them to start generating again—for the moment. What remain unaddressed are the structural issues that cause the debt to pile up again: poor recovery of dues (receivables stand at $4 billion), electricity theft, transmission losses, reliance on imported oil and politically sensitive subsidies for certain groups. Perpetuating all of this is a lack of efficiency and co-ordination across a maze of state-owned agencies including a power purchaser, distribution and generation companies, a regulator and various ministries. The gap between the effective cost of generation and payments received is estimated at $12 billion over the past four years.

Riots over power shortages in Pakistan are not new. But this time the protests flared up against a unique political background: that of a prime minister's conviction. On April 26th Yousaf Raza Gilani was declared guilty of contempt of court for refusing to re-open various corruption cases pending against Asif Ali Zardari, the president. In response, the Pakistan Muslim League-Nawaz (PML-N), the main opposition party, claimed the prime minister stood disqualified and started calling for his resignation in parliament and through public rallies.

For PML-N chief Nawaz Sharif, then, the power crisis could not have come at a better time. His party does run the Punjab government, but that has not stopped him trying to shift the blame onto the federal government. His parry is not merely rhetorical; Punjab relies on the centralised distribution of energy generated by resources in other provinces. Mr Sharif's brother, the chief minister of Punjab, joined the power protests in Lahore.

At stake is more than just the fate of this particular government. If Mr Gilani makes it through the budget on June 1st and to elections next year, he will be the first elected prime minister to complete a five-year term. That would mark an historical achievement in the country's constantly interrupted democracy.

But the disruption of lives and livelihoods may now have gone too far for the anger to confine itself to just one set of politicians. In the town of Vehari, rioters burned the offices of lawmakers belonging not only to a ruling coalition partner (which has threatened to quit the government over the issue), but also the PML-N and the Pakistan Tehreek-e-Insaf, the party of Imran Khan, who positions himself as the country's only hope for change. Pakistan's politicians might find they need to start addressing this issue, not just politicising it.

(Picture credit: AFP)

In this Dec 11, 2012 photo, drivers queue at a gas station in Islamabad. — Photo by AP

ISLAMABAD: It has become a familiar site across Pakistan in recent weeks: Long lines of cars and minibuses snaking for hundreds of yards as their frustrated drivers wait to fill up their tanks with natural gas.

The reason for the long lines is a pricing dispute involving the government and the Supreme Court that has caused many station owners to shut down their gas supply.

The crisis is a symptom of a much larger problem destined to cause drivers even greater pain in the future: Pakistan's demand for natural gas, and other forms of energy, is quickly outstripping supply.

"We have this problem that is growing bigger and bigger every year," said Khurram Husain, a Pakistani business journalist who's been following the natural gas crisis closely. "Each of the big consumers of natural gas is now vying with each other."

The government of former President Pervez Musharraf began promoting the use of compressed natural gas, or CNG, in private vehicles nearly a decade ago. The idea was to reduce the money the government spent on buying oil internationally and instead rely on Pakistan's domestic natural gas reserves.

So the previous government kept the price of CNG low, promoted the importation of equipment for cars to run on natural gas and rapidly gave out licenses to open stations. The use of CNG has an added benefit of being less polluting, since it tends to burn cleaner than gasoline.

Unfortunately for the current government, the policy was incredibly successful — and is unsustainable. Pakistan has 3.5 million private vehicles running on CNG, more than 80 per cent of vehicles in the country and more than any other country in the world. But Pakistan's gas supplies can't support this demand while also feeding power plants, fertilizer companies and other businesses that rely on the fuel.

So officials are now grappling with the painful task of trying to reverse the policy, trying to wean cars back onto gasoline to redirect the limited supplies of natural gas to other sectors where they believe it will be more productive — power plants, for example. Pakistan already suffers widespread power outages in the summer in part because power plants don't have enough fuel to run.

And Pakistan's limited supplies are running out. According to the Advisor to the Prime Minister on Petroleum and Natural Resources, Asim Hussain, the country's two largest natural gas fields are expected to run dry by 2022. Officials are trying to draw international companies into developing the other fields in part by offering better terms than they have in the past when the government kept natural gas prices low.

Pakistan has been in talks with neighbouring Iran to import natural gas through a pipeline that the Iranians are building on their side. But that plan has run into opposition from the US, which wants to keep pressure on Iran because of the country's nuclear program. Pakistan lacks the infrastructure to increase imports of natural gas.

Pakistan's energy consumption in general has grown 80 per cent over the last 15 years, according to the Pakistan Institute for Petroleum. A big part of the energy crisis is dealing with massive inefficiencies in the system, such as huge numbers of customers who don't pay their bills and widespread theft and losses due to inefficiencies across the energy grid.

The latest crisis sprung up in October when the Supreme Court examined the pricing structure of gasoline and CNG and essentially determined station owners were making too much money. State regulators then drastically dropped the maximum price at which CNG station owners could sell their product.

As a result, at least 1,800 of the country's 3,395 CNG stations closed because they were unable to operate, said the chairman of the All Pakistan CNG Association, Ghayas Paracha. He said the government closed at least 800 more for various reasons such as not paying their bills.

That's when the long lines and frustration began.

School bus driver Feroz Ahmad in Karachi said he waits in line for CNG for up to four hours each time he goes to the pump. His minibus can also run on gasoline but that would be more expensive.

"I can't afford petrol because of the high price. I would have to increase the pickup and drop-off charges" for the children he takes to and from school, he said.

Before the recent price change, CNG cost about 30 per cent less than gasoline. Before that, CNG was even cheaper in comparison, but the government had managed to bring CNG prices up bit by bit to wean consumers off it through a variety of means, including raising surcharges on station owners.

"We are the 27th largest producer of gas in the world, and we are number one in CNG cars. So either those 26 countries are mad or our policies are bad. And I think it is the latter," said Hussain, in an interview with The Associated Press. "We have wasted our gas, basically."

The CNG station owners have built up an infrastructure that spans the country and are fighting back. Paracha, the head of the CNG association, said if all the vehicles on the road started using gasoline instead of natural gas, there would be a huge increase in pollution, and it would be extremely expensive to import all the fuel.

"This will have a very, very bad impact on the economy," he said.

Most other countries that use natural gas for private vehicles have an abundance of natural gas, said Leslie Palti-Guzman, an energy analyst at the Eurasia Group. Iran, for example, also uses natural gas extensively for private vehicles in part because international sanctions on its nuclear program make it impossible to export natural gas.

Other countries tend to use it more for things like fleets of buses or taxis, Palti-Guzman said. Then they can reap the environmental benefits of using natural gas, which tends to burn cleaner than oil or coal, without having to build an entire network of CNG stations around the country.

But getting Pakistani drivers to use more expensive gasoline is politically difficult, especially with an election coming up soon.

Ask anyone in the lines in Pakistan's largest cities who is to blame for the current crisis and the list is extensive: the CNG station owners for allegedly gouging customers, the government for failing to keep prices in check, even the Supreme Court for failing to find a suitable compromise.

Few seem aware of the larger problem of Pakistan's rapidly dwindling natural gas supplies.

"I really don't know what's wrong with the gas supply," said Nayaz Khatak, a government worker in Islamabad waiting to fill up his car. "There is no shortage as such."

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