* Energy crisis in Pakistan takes a turn for the worse
The energy sector is the backbone of a nation’s economy, playing a vital role in driving economic growth, industrialisation, and development. A stable and reliable energy supply is essential for powering industries, transportation, and infrastructure, which fuels economic activity, creates employment opportunities, and attracts investment. Energy security also directly impacts a nation’s trade balance, inflation, and currency value. Moreover, investments in the energy sector drive technological advancements and innovation, particularly in clean energy technologies and energy efficiency measures. In essence, a robust energy sector is critical for a nation’s economic prosperity, competitiveness, and sustainable development, making it a key priority for governments and policymakers worldwide.
Like any nation, the energy sector is a critical component of Pakistan’s economy, playing a vital role in driving economic growth, development, and prosperity. Pakistan’s economy is heavily reliant on energy-intensive industries such as textiles, cement, and fertilizers, making a stable energy supply essential for their operation. The energy sector also has a significant impact on the country’s trade balance, as Pakistan imports a substantial amount of oil and gas to meet its energy needs, affecting its foreign exchange reserves and balance of payments. Moreover, the energy sector is a significant contributor to Pakistan’s GDP, and investments in the energy sector have the potential to create jobs, stimulate economic activity, and increase tax revenues. Therefore, the development of the energy sector is crucial for Pakistan’s economic progress, and the government has implemented various policies and initiatives to promote the exploration, production, and use of energy resources, aiming to enhance energy security, reduce dependence on imports, and fuel economic growth.
Pakistan’s energy crisis continues to worsen, with the power sector’s circular debt reaching Rs2.703 trillion as of November 2023. The country’s reliance on imported fuels has significantly strained the national treasury and driven up electricity prices. To address this, the government has proposed a shift towards local coal and renewable energy sources. The budget for 2024-25 has allocated a substantial amount for power subsidies, but critics argue that this approach fails to address the root cause of the problem. The government’s decision to terminate subsidies for agricultural tube wells may also have negative consequences.
Pakistan’s energy crisis is further complicated by its reliance on coal, which poses significant environmental and health challenges. The country’s commitment to international climate goals and the well-being of its citizens is at risk. The government’s approach to addressing the energy crisis has been criticized for its lack of coherence and long-term vision. The country’s dependence on imported fossil fuels needs to be reversed, and a shift towards domestic renewable energy sources is crucial. Short-term contracts with portfolio players and a new solar policy aimed at reducing LNG dependence are some of the measures being considered. However, a comprehensive and sustainable solution to the energy crisis remains elusive.
The energy crisis in Pakistan is a complex issue that requires a multifaceted approach. The government needs to prioritise a shift towards renewable energy sources, reduce dependence on imported fuels, and address the structural issues in the power sector. The budget for 2024-25 is a missed opportunity, and the country needs a more coherent and long-term strategy to address its energy crisis as Pakistan’s energy crisis is characterised by electricity shortages and frequent load shedding or rolling blackouts, which has a detrimental impact on household activities, industries, and the overall economy where the energy sector of Pakistan is heavily reliant on fossil fuels, which account for 59-64 per cent of the country’s total energy supply so we face significant challenges in its power sector, resulting in frequent shortages, including transmission losses, transmission constraints, consumer-related issues, and governance issues.
The Government of Pakistan has also proposed a tax on solar panels, which has been met with controversy and justified by IMF conditions and challenging tax revenue target of Rs13 trillion ($46.66 billion) for the year starting July 1, a near 40% jump from the current year but the question is what is the way out to this problem? How consumers are relieved from the pain of heavy bills?
The Government of Pakistan can address the crisis of heavy electricity bills by implementing measures to reduce the burden on consumers. One approach is to subsidise electricity tariffs for low-income households and industries, targeting those who are most affected by the high costs. Additionally, the government can invest in renewable energy sources like solar and wind power, which are becoming increasingly cost-competitive with fossil fuels. This would reduce the reliance on expensive imported fuels, decrease the overall cost of electricity generation, and pass the savings on to consumers. Another strategy is to improve the efficiency of the power distribution system, reducing transmission losses and minimizing waste. The government can also promote energy conservation measures, such as encouraging the use of energy-efficient appliances and lighting.
Furthermore, considering the budget 2024-25, the government can allocate funds to support the development of indigenous energy resources, like hydroelectric power, and offer incentives for private sector investment in renewable energy projects. By taking a comprehensive approach, the government can provide relief to consumers, stimulate economic growth, and ensure a sustainable energy future for Pakistan.
Sustainable solutions and relief plan
The Government of Pakistan must adopt a multi-pronged long-term strategy to address the energy crisis and provide affordable electricity to its citizens by diversifying its energy mix by investing in renewable energy sources like solar, wind, and hydroelectric power, which are not only sustainable but also cost-effective in the long run.
Additionally, the government should focus on developing indigenous energy resources like coal, gas, and uranium, and encourage private sector investment in energy generation, transmission, and distribution. This will reduce Pakistan’s reliance on imported fuels, decrease the burden on foreign exchange reserves, and lead to a significant reduction in energy costs. Furthermore, the government must prioritise energy efficiency and conservation measures, such as promoting the use of energy-efficient appliances, smart grids, and smart meters. It should also invest in energy storage technologies like batteries to stabilize the grid and ensure a reliable supply.
Furthermore, the government should develop a comprehensive energy plan with clear targets, timelines, and investments, and encourage research and development in energy technologies to develop innovative solutions. By adopting a long-term strategy that prioritises sustainability, efficiency, and affordability, the government of Pakistan can ensure a reliable and affordable energy supply for its citizens in the future.
Additionally, the state should also focus on upgrading and modernizing the country’s transmission and distribution network to minimise energy losses and improve efficiency. This can be achieved through investments in grid infrastructure, smart grid technologies, and advanced metering systems.
Moreover, the government should promote decentralised energy generation, such as rooftop solar and community-based renewable energy projects, to reduce the burden on the national grid and provide energy access to remote and off-grid areas.
Lastly, the government should develop policies and programs to promote energy conservation and efficiency in various sectors, such as industry, transportation, and buildings. This can include incentives for energy-efficient technologies, building codes and standards, and public awareness campaigns. By adopting a comprehensive and integrated approach to energy development, Pakistan can ensure a sustainable and affordable energy future, drive economic growth, and improve the quality of life for its citizens.
The Authro is MD IRP/ Faculty Department of H&SS, Bahria University Karachi