Pakistan’s new energy policy

Published: August 6, 2013

The absurd idea of shutting down commercial areas at night to conserve electricity appears to be making a comeback. PHOTO: FILE

Bitter truths are not easy to tell, particularly for politicians speaking to their constituents. Yet, one cannot help but commend Prime Minister Nawaz Sharif and his administration for taking the early months of their tenure to tell the public what their predecessors were unable to for the past six years: that electricity supply in Pakistan cannot be both cheap and uninterrupted.

In announcing the national energy policy, Water and Power Minister Khawaja Asif was remarkably candid about the need for a rise in power tariffs for almost everyone in the country. And, by stating explicitly that even households would see their electricity bills go up, he laid to rest what had been some disturbing initial reports that the burden of higher energy costs would be shouldered disproportionately by the industrial sector.

The energy plan laid out by the minister and presented to the Council of Common Interests contains quite a few good ideas that we support. It focuses the government’s efforts on reducing the weighted average cost of producing electricity by shifting to cheaper fuels and cracking down more forcefully on theft. It proposes charging higher rates from industrial and upper-middle class household consumers, who have heavy electricity use and for whom the higher tariff, coupled with a guarantee of uninterrupted supply, would still be cheaper than running back-up generators. And it proposes privatisation of state-owned energy companies to reduce the influence of corrupt labour unions.

These are all sensible strategies. We are also glad to see that the Nawaz Administration took some time in crafting its strategy, rather than rushing to meet an artificial deadline. And it is also commendable that the prime minister seems to be resisting what must be enormous pressure from several powerful lobbies that are opposed to his policy of prioritising the power sector for natural gas supply.

The policy strikes a reasonably fair balance between the need to eliminate subsidies while also ensuring that electricity remains affordable for the poorest of our fellow citizens. Retaining the subsidy for households that consume less than 200 kilowatt-hours of power every month seems like a good approach. If the government is able to restrict its subsidy to just this group, its overall subsidy bill is likely to go down by over 80 per cent, according to an analysis conducted by the World Bank.

The policy, however, is not without flaws. The absurd idea of shutting down commercial areas at night to conserve electricity appears to be making a comeback. This is an absolutely nonsensical suggestion that is a favourite of the federal bureaucracy. Such a proposal comes from the absurd notion that the purpose of the energy policy is to reduce power cuts, a remarkably short-sighted and poorly thought-out objective. No, the real purpose of the national energy policy should be to eliminate the gap between demand and supply and to ensure an adequate supply of electricity for economic activity in the country. How does it make any sense to have a reduction in economic activity as part of the energy policy? As usual, the bureaucrats have got it backwards and it is disappointing to see that the minister appears to be going along with their absurd schemes.

There are, however, important areas that the policy ignores completely. For example, while there is a commendable emphasis on using more technological tools to isolate areas of theft and crack down on pilferers, there appears to be no effort to improve the government’s analytic abilities in the realm of energy pricing. The decision to move to coal, for instance, is based entirely on today’s relative prices of coal and oil, not how that relationship might change over the next few decades.

Yet, for all its shortcomings, the manner in which the energy policy has been handled politically by the administration is an exercise in statesmanship on the part of the prime minister. It is rare to see such leadership on matters of such critical importance to the economy. We hope the implementation of this grand vision is just as well-managed.

Published in The Express Tribune, August 7th, 2013.

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Reader Comments (10)

  • Ammar
    Aug 6, 2013 - 11:09PM

    Shutting down the commercial areas at night is not absurd at all…our successful neighbours and almost all the developed countries and the developing countries(except UAE,GCC) are practicing this idea and saving a lot of energy. Roaming in the market for no reason is not advised at all…the original customer will not be effected.

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  • Maverick
    Aug 7, 2013 - 12:25AM

    The economic policies articulated in this article are so reactionary they are right of Attila the Hun!

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  • Sodomite
    Aug 7, 2013 - 12:42AM

    @Ammar:
    Agree completely. Sit at home, read a book, watch TV and enjoy your family. That’s how normal people live. No need for Lur-Lur.

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  • ahmad
    Aug 7, 2013 - 1:39AM

    The fluctuation in international prices of coal will not be a problem for Pakistan as Pakistan will not have to import coal unlike oil.

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  • SM
    Aug 7, 2013 - 2:00AM

    “The absurd idea of shutting down commercial areas at night to conserve electricity appears to be making a comeback. This is an absolutely nonsensical suggestion that is a favourite of the federal bureaucracy…”

    Definitely Mr. Editor, for a person like your good-self who’s a journalist, this idea would seem “nonsensical” because you might have very little sense about energy management. If you happen to know what energy management is, its not only about overcoming the gap through enhancing supply but also through rationally managing the demand. There would be no significant effect on commercial activity which seems to be your major concern. You must be knowing that in countries like Germany, one of the world’s largest economies, the commercial activity closes at 8.00PM, how much their economy has suffered due to that??

    I request you to please make yourself well-aware about the norms which are in practice before commenting on such issues which require particular expertise and sectoral know-how before you start bashing bureaucracy or government.

    Lastly and honestly, this language doesn’t suit to be an editorial’s language for a newspaper like ET! Please improve it.

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  • H Chaudhry
    Aug 7, 2013 - 5:48AM

    @Maveric There is nothing reactionary here. Demand Side Management is common practice through out the developed world. While the supply side projects take time to develop and come in to existence, demand side initiatives of shedding load in Commerica sector in night and residential sector in day is very much a known practice. Simialrly, Government should do more to provide Free CFLs, Energy Savers, Water saving devices as the cost of these units is much less than the energy required to run these! Simple Energy Efficiency practice.

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  • Polpot
    Aug 7, 2013 - 6:53AM

    When the Electricity Bills with the enhanced tarrifs
    +++++++++++++++++++++++++++++++++++++
    will reach the consumers is when the honeymoon of NS will be completely over.

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  • Ahmad Nasser
    Aug 7, 2013 - 9:06AM

    Excellent comment except for closing businesses early and use of coal in comparison to oilkl;/k.. Closing shops earlier cannot be a long term plan. It is a temporary solution to reduce the demand at a time of high demand. People can go to shops during the day instead of in the evening but all need electricity at night to have some light. As for coal, how have you determined that coal will be more expensive than oil in the future. It will never be since oil price is set by transportation fuels (petrol, diesel and aviation fuel), whereas coal price is set by its heating value. Due to environmental pressures coal will always be cheaper than oil on a calorific (heating) value basis. May I suggest that next time ET writes an editorial on technical matters, it better consult some professionals rather than simply brnd matters absurd or blame the ‘poor’ bureaucrats.

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  • Walayat Malik
    Aug 7, 2013 - 4:55PM

    Mr. Editor, I am surprised to read your premise of closing commercial centres early as ‘absurd’. Please know that in most advanced countries like USA and Canada all stores, plazas and malls close at 9pm. Pakistan should do the same and reap the benefit of conserving electricity.

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  • Aug 7, 2013 - 9:18PM

    The 6 rupees increase per unit in electricity tariff for domestic consumers using more than 200 units will be unbearable for the middle class and will compel even the hitherto non defaulters to power theft.

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