Tackling the energy crisis

Long-term reforms in the energy sector would require swift, well-coordinated efforts by the new administration.

Prime minister-elect Nawaz Sharif reportedly asked for assistance from Beijing for fixing Pakistan’s energy crisis in his meeting with the Chinese Premier, Li Keqiang, last week. A reference to the civil nuclear technology sector was also made during the meeting. As an astute politician, Mr Sharif also emphasised the need for investments in Pakistan’s energy sector instead of aid during this important meeting. It has also been stated by PML-N circles that a team of experts will accompany Mr Sharif during his visit to Beijing, once he takes charge of the country, to discuss proposals, which include energy-related assistance from China.

The PML-N’s election campaign centred on the energy crisis and it promised that it would lift the nation out of  “darkness”. This promise and the current state of play worked well for the PML-N. Indeed, the power sector has played havoc with the economy, debilitating industry and rendering thousands jobless. Tackling the circular debt issue would be the short-term priority while the long-term and much neglected reforms in the energy sector would require swift, well-coordinated efforts by the new administration.

Where does China and other foreign powers stand in this crisis? The key expectation of the new government would be to obtain concessional oil supplies from Saudi Arabia that may help with the short-term alleviation of the structural issue. China can also surely help Pakistan through expertise and investment in the sector. Pakistan’s vast and largely untapped coal reserves can be utilised with Chinese assistance (a far more practicable idea than reliance on civil nuclear technology). Similarly, the ongoing, planned hydropower projects need to be expedited. But all these measures require a medium term for fruition. Political governments are handicapped by public pressure and the need for delivery in a short span of time.

Perhaps, the most challenging aspect of the energy sector crisis would be to cough up additional revenues from an over-committed budget to manage the circular debt. To achieve this, the new government has to introduce fiscal reforms at the earliest. The forthcoming budget, therefore, would highlight the PML-N’s intent as to how serious it is to reduce wasteful expenditures and overcome the culture of political expediency.

Published in The Express Tribune, May 26^th, 2013.