Energy Crisis of Pakistan: Analyzing Governance Issues

Abstract

Pakistan faces an energy crisis because of shortages of energy which has emerged as major risks to the economic growth and the living standards of the citizens.  The objective of this study is to analyse energy shortages as well as the governance issues in the power sector of Pakistan and recommend policies to improve governance and achieve financial and technical sustainability. The analysis suggests that power shortages can be minimized significantly by improving financial management and utilizing the full existing capacity of power generation. Addressing the issue of circular debt will improve the financial management which requires payment of tariff subsidy by the government to the distribution companies on time to enable the CPPA to make timely payments to the fuel companies and the IPPs.  Tariff subsidy can be reduced by reducing the cost of power generation through reduction in theft of electricity and line losses.

We recommend policies to implement the integrated and cohesive development, planning, and execution of policies across the energy sector along with improving the corporate governance. While gas and oil pricing policies should be revisited to realize the sector’s full potential in the sedimentary basin, there is a need to formulate policies to provide incentives for the development of tight and shale gas.  The expensive energy mix can be diversified by formulating policies to increase reliance on domestic sources particularly through exploiting substantial untapped coal potential for power generation. In addition, government need to provide incentives to realize renewable energy resources like wind and solar which can add significant generation capacity at a competitive tariff. Federal government needs to play its role in developing a consensus among provinces for construction of mega dams so as to increase country’s hydel capacity