The solution to Pakistan energy crisis lies in a three-decade-old concept that was never really given a chance.
“Integrated energy planning and policy formulation (IEP) and the restructuring of institutions are simple ideas that can pull the country out of the colossal ongoing energy problems,” said economist Ziad Alahdad.
The visiting senior fellow at Pakistan Institute of Development Sciences (PIDE) and former World Bank director of operations was speaking at the launch of his research paper “Pakistan Energy Sector: From Crisis to Crisis-Breaking the Chain” at Quaid-i-Azam University here on Tuesday.
He said lost opportunities, prohibitive delays, implementation performance, and reform reversals are now norms in the energy sector, which are symptomatic of virtually all sectors of the economy.
“The problem is not what the objectives are but how they can be achieved,” Alahdad said.
He said that the overwhelming evidence from energy analysts points to the absence of coordinated policy formulation as a fundamental issue.
On the concept of IEP and the institutional structure, he maintained that decision making in the sector remains inherently flawed and policy initiatives are reduced to shooting in the dark. Rather than offering prescriptive solutions, he advocated building Pakistan’s own capacity to facilitate sound policy decisions.
He added that the IEP mechanism was tried and tested in developed and developing countries alike and was introduced in Pakistan in the early 1980s. However, over time, with the decline of institutions and erosion of human capacity, the fledgling efforts were abandoned.
“This was partly because IEP lost favour with international institutions on the presumption that market forces would lead to the right policy choices. Resultantly, what is now in place is a largely ad-hoc process which responds to crisis situations instead of averting crises through a long-term vision.”
He added that the key element in IEP — to consolidate policy institutions into a single ministry of energy — is perhaps the most difficult and therefore requires strong political will. Policymakers are beginning to think along these lines but inherent in their deliberations is the potential spin-off of hydropower into another ministry, a move that would undermine the whole effort, he said.
He demonstrated how IEP can address serious issues confronting the sector including the growing supply-demand gap, low utilisation of existing resources, developing the optimum energy mix, circular debt, subsidies, and most importantly, alleviating the burden on the poor through pro-poor energy policies.
Planning Commission Member Shahid Sattar highlighted three key issues — exorbitant level of energy subsidies (Rs 1.4 trillion) with little to show in terms of results, the lack of policy papers in the energy sector, and the importance of an appropriate pricing policy.
“We all know about the problems, what we need is solutions and policy papers to guide the government,” Sattar said. He said the need for IEP is “unquestionable” until a market economy develops. He reiterated that the implementation performance and poor governance need to be addressed urgently.
PIDE Vice Chancellor Dr Rashid Amjad said that lack of coordination between the Planning Commission and the Finance Division has adversely affected efforts to jump-start the economy. He said that too many actors at policy level, a lack of political will and issues of pricing and subsidies remain paramount.
Published in The Express Tribune, November 28th, 2012.
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