Energy Crisis in Pakistan: Causes and Impacts

Outlines

  • Introduction

  • Factors Accentuating Energy Crisis in Pakistan

  • Burgeoning population growth

  • Poor and inefficient exploitation of indigenous resources of energy

  • Inefficient recovery system in the energy sector

  • Mounting circular debt

  • Dismal overreliance on imported oil and gas

  • Myopic vision of the ruling politicians

  • Constant deterioration of law and order

  • Poor control of transmission and distribution lossés of electricity

  • The rapid pace of urbanization

  • Inefficient electric appliances Severe Repercussions Unleashed by Energy Crisis

  • Rapid closure of industries

  • Increased capital flight

  • The massive reduction in exports

  • The huge increase in imports

  • Abysmal foreign direct investment

  • Intensification of poverty

  • Pathetic agriculture output

  • Massive brain drain

  • Erosion of belief on the democratic system

  • Conclusion

There is no denying the fact that the energy crisis is at the core of most of the challenges Pakistan is facing presently. The crisis is so entrenched that its debilitating effects are visible in all the sectors of the country. Be it economic, social, political or domestic front, almost all vital sections of the society are in severe grip of the energy crisis. Economically, it has, on one the hand, accelerated the closure of industries along with capital flight and huge decrease in exports, thus halting the economic growth to an alarming extent; while on the other, it has led to colossal decrease in the agricultural output. Such devastating effects on the industrial and agricultural fronts, in turn, have given birth to massive reduction in employment opportunities, thus further intensifying the vicious cycle of poverty in the society. Apart from economy, domestic sector also bears the brunt of energy crisis. Frequent unscheduled power cuts for 12-15 hours a day further compound the miseries of common man, especially during summer. The ramifications become further disruptive and debilitating when one takes into consideration the political front. There is no denying that the government’s inability to resolve the constantly prevailing energy crisis has eroded people’s belief in the democratic set-up and, such erosion of belief, undoubtedly, has put the future of democracy in the country in jeopardy. Despite the dire situation, recovery is still possible; solutions are within reach. Drastic measures like emphasis on exploiting full potential of hydropower by constructing small to medium level dams, privatization of publicly owned distribution companies, efficient monitoring of electricity supply, exploitation of indigenous resources, reducing dependence on non-renewable sources of energy, etc. can go a long way in containing the menace of energy crisis.

If we analyse the nature of the crisis, we come to know that energy crisis has not assumed such alarming proportions overnight. Rather, it has taken quite a long period to reach such critical heights. Of course, there are a host of factors which have contributed significantly to worsening the crisis.

One of the most important factors contributing to the energy crisis is the burgeoning population growth. The growth of population has been so rapid that it has led to huge increase in their energy needs. However, the supply of energy has not increased at the same pace as that of population growth. Thus, it has resulted in wide gap between supply and demand of energy. This is why the majority of the population is faced with the mounting energy constraints. During summer, these constraints reach unbearable limits, triggering 10-15 hours of load-shedding. Undoubtedly, had there been effective checks on the population growth, the crisis would not have assumed such alarming proportions.

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Coupled with population growth, government’s apathy towards exploitation of indigenous resources of energy is equally responsible for the crisis. It is an undeniable fact that successive governments have neglected the exploitation of local reserves. Such criminal negligence on the part of the government has not only debilitated the supply of energy but has also made governments dependent on the expensive imports of energy. There is no denying that Pakistan abounds with huge reserves of energy including both renewable and non-renewable. However, their management and exploitation has been the central issue. In a nutshell, lack of emphasis on the exploitation of local reserves has played destructive role in aggravating the energy crisis in the country.

Furthermore, inefficient recovery system has also contributed to the intensification of the crisis in Pakistan. It is an a hard fact that electricity thefts are so widespread in the society that they significantly undermine the recovery of the cost of electricity. It is often seen that the powerful and the influential segments of population in collusion with the staff of power generation and distribution companies are involved in huge electricity thefts which not only weaken the recovery pool but also add to the circular debt in the energy sector. Adding fuel to the fire, the poor and inefficient monitoring of the electricity supply further exacerbates the recovery side. No doubt, the current government has brought the recovery inefficiency from 24% to 16% but still there is a dire need to take further measures in this respect.

Along with inefficient recovery system, the issue of circular debt has also contributed to the constant prevalence of energy crisis in the country. Poor recovery of the cost of the electricity coupled with subsidies from the government usually leads to strangulated cash flow in the energy sector, thus entailing massive circular debt. It is beyond doubt that the constant looming of the circular debt over the energy sector has reduced the capacity of power generation companies along with oil importing bodies. Hence, circular debt is equally responsible for the energy shortages in the country.

Quite hand in hand with mounting circular debt, over-reliance on oil and gas for the generation of electricity also contributes a lot to the aggravation of energy crisis. Almost two-thirds of power generation is dependent on oil and gas based power plants. Needless to say, such massive dependence on these expensive sources makes the situation highly precarious and volatile in the energy sector. Dependence on oil not only increases the import bill, dealing a severe blow to the foreign exchange reserves but also makes consistent supply of energy in the country extremely difficult, given the volatile prices of oil in the international market.

There is no surprise in the fact that behind over-reliance on oil and gas is the myopic vision of the rulers. The ruling politicians view energy policy in short-term. Since they are hungry to take the political credits, they prefer short-term expensive projects to long-term cheaper ones. In other words, in order to complete the energy projects in their own political tenure, ruling politicians often resort to highly expensive projects like oilbased power plants. Pakistan does have huge potential of untapped hydropower. But the problem is that successive governments have neglected them because hydropower projects take longer time as compared to ones based on oil and gas. Apart from the time factor, kickbacks are also involved behind preference for oil and gas based power projects. It can be conclusively said that myopic vision of the politicians which drives them to put personal interests over national interests significantly contributes to the prevailing energy crisis.

Additionally, the role of the constant prevalence of poor law and order situation in the country cannot be denied as far as energy crisis is concerned. Due to constant deterioration of security profile in the country, the foreign as well as local investors have been hesitant to invest in the energy sector of the country. With extremism and terrorism on constant rise, investment in the energy sector has been abysmally low. To be sure, lack of investment in the sector has, on one the hand, worsened energy crisis; while on the other, it has strangulated the job opportunities. Undoubtedly, had the menace of extremism and terrorism been non-existent, the country would have seen healthy and promising inflows of money in the energy sector, rendering huge help in curtailing the energy crisis in the country.

In addition to that, transmission and distribution losses of electricity have further compounded the crisis in Pakistan. Transmission and distribution networks are so outmoded and antiquated that a major chunk of electricity is lost during the conveyance. Absence of initiatives of replacement of such outdated networks is at the core of the issue. If the government had enhanced the efficiency on distribution and transmission side of the energy, to be sure, it would have helped a lot to contain the energy crisis.

Moreover, the rapid and undisciplined growth of urbanization is also responsible for accentuating the energy scenario in Pakistan. It is an obvious fact that the ongoing decade has seen an extraordinary expansion in cities. Such expansion has appeared especially in the form of rapid growth of housing societies. Agricultural lands adjacent to cities are being transformed into urban areas at a rapid rate. Obviously, such unusual increase in urbanization has led to massive increase in the energy needs of the urban dwellers, resulting in extraordinary rise in the number of vehicles and household electrical appliances. Thus, the role of rapid urbanization in worsening energy crisis is quite undeniable.

With massive increase in urbanization leading to enormous use of electrical appliances, a number of companies have entered the arena in order to meet the mounting requirements of electrical appliances. This phenomenon in tum has resulted in the rise of appliances which are highly inefficient with respect to energy consumption. Adding fuel to the fire, lack of control and regulations on the part of the government has further compounded the situation. Thus, influx of energy-inefficient appliances is also responsible for the worsening crisis to some extent.

There is no denying that the entrenched nature of energy shortages has given birth to a plethora of repercussions in different walks of life. Various sectors of the country have been undermined by it. Among the most hard-hit sectors, it is perhaps the economic front, which has borne the brunt of energy crisis. Due to constant prevalence of the crisis in the country, many industries have been unable to get constant supply of energy. Such lack of persistent supply of energy has not only increased the cost of doing business in the country, but also has also resulted in closure of many industries.

Among the industries, especially textile sector of the country has been in the doldrums. Hence, we see that many textile units in the manufacturing sector have closed because of the lack of constant supply of energy. Coupled with rapid closure of industries, export side has also been affected. There is no denying the fact due to energy shortages, many export-based industries have resorted to expensive alternatives of energy, which has not only increased the cost of production, but also has delayed the timeline of delivery. Thus, increased cost coupled with poor timeline has resulted in the dwindling of exports. Resultantly, we see that shrinking export against increasing import has spawned a massive trade deficit in the country, posing grave threat to the economy.

The story of economic miseries does not end here. The impact of energy crisis on the economy has also appeared in the form of rapid capital flight. It is quite unfortunate that due to the increased cost of business triggered by inconsistent supply of energy, many businessmen have shifted their business set-ups in foreign countries, leading to massive capital flight. The issue of capital flight has further been compounded by local investors hesitation to invest their money in the country. To be sure, had energy shortages been curtailed, capital flights could have been avoided to great extent.

Adding fuel to the fire in the economic front, energy crisis has also increased the volume of imports to great extent. With local industries incapacity to meet the rising demands of the masses, the import side has seen unusual increase in its volume. The enhanced size of imports has not only given damaging blow to the foreign exchange reserves but has also increased the trade deficit. The depletion of foreign exchange reserves coupled with mounting trade deficit speaks volumes about the dismal performance of the economic sector, thanks to energy crisis.

The constant prevalence of energy crisis has created deterrence not only for local investors but also for foreign investors. There is no denying the fact that energy crisis is at the heart of abysmally low foreign direct investment in the country. Constant energy crisis along with deteriorating law and order situation has played significant role in curtailing foreign investment in the country. Obviously, dismally low FDI has many implications on the socio-economic front. It not only gives devastating blow to the much-needed job opportunities, fuelling poverty in the society, but it also compounds the deficiency of mobilization of local resources. Undoubtedly, absence of creation of jobs against the backdrop of huge youth bulge in population is one of the serious threats, threatening the already volatile socio-economic fabric of the country.

Aside from FDI, energy crisis has also unleashed grave implications on the agriculture sector in the country. Due to intermittent supply of energy in the country, there has been poor growth in the agricultural yield. The fact that most of population is dependent on agriculture for their subsistence further mars the scenario. This is why we see most of the population trapped in the vicious cycle of poverty in the rural areas. There is no denying that agriculture is the cornerstone of national economy. Most of the raw material in the industrial sector also comes from agriculture. Besides, agriculture also constitutes the inherent part in the export side. Thus, it is not difficult to understand that implications of the energy crisis on agriculture means cutting at the roots of the economy of the country. This easily explains the fact why national economy always lurches from one crisis to another.

Among the gravest implications of poor economic growth is the large scale brain drain in the country. Pakistan is one of the countries which have been hit hard by migration of their citizens to other countries, especially western. The migration of illiterate segments of population does not have any serious impacts. However, the shifting of brilliant minds in foreign countries is a worrying phenomenon for the country. This is because death of talent not only gives a severe blow to the economy, but also makes the country dependent on import of foreign talent, putting extra strain on the national exchequer besides leaving the country at the mercy of incompetent hands. Briefly speaking, brain drain is not only indicative of rampant poverty in the country but it also transpires alarming lack of trust between the rulers and the talented people.

Coupled with brain drain, another grave implication appears in the form of dismal erosion of people’s belief in the democratic system. There is no denying that successive governments’ incapability to curtail the energy crisis has contributed a lot to the political problems of the country. And constant political instability constitutes one of the most prominent political issues, and undoubtedly, this issue is the result of the lack of trust among the masses and their political representatives. And lack of such trust is basically founded on successive governments’ inability to resolve the ever impending energy crisis in the country. Had the country been cured of the disease of energy crisis, the plant of democracy would have taken strong roots in the country.

All the discussion drives us to the conclusion that energy crisis is among the gravest challenges surrounding the country. The gravity of the crisis can be gauged from the fact that it has the potential to unleash waves of chaos in the socio-economic and political fabric of the country. As it is a manmade phenomenon, it lies within the ambit of solution. Optimistically speaking, it can be contained with the help of multi-pronged policies, both short-term and long-term. Measures like containing electricity thefts along with corruption in the energy sector, building small to medium level dams in all the provinces, exploiting indigenous resources of both renewable and non-renewable energy, sensitizing the masses about conservation of energy, improving security profile of the country in order to attract FDI in the energy sector, and taking private sector on the board can work wonders in the energy sector provided that they are pursued with unflinching commitment and sincerity of intentions.

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