Why Pakistan is facing a severe power crisis

The long-standing energy crisis in Pakistan has now snowballed into a serious issue. The government of Pakistan has asked the factories to shut off early, and has cut down the working hours of public servants. 

The Pakistan National Information Technology Board (NITB) has warned about shutting down of internet services due to long hours of power outages as this is hampering the operations of mobile towers.

Prime Minister Shehbaz Sharif has warned about load shedding in the next couple of days, Geo News reported.

WHAT HAPPENED?

Pakistan has failed to strike a deal for Liquified Natural Gas (LNG) for next month, which is needed to fuel the power plants in the country. In the wake up of Ukraine-Russia war, energy supplies have been hit across the world. Pakistan has been facing this huge crisis because of two reasons:

• First, the prices of gas, especially LNG has soared up due to limited availability which has made it difficult for the cash-strapped country to procure energy imports.
• Second, since Europe in its resolve to break ties with Russia over Ukraine invasion has purchased much of the LNG gas, there is a scarcity of LNG in the market.

PAKISTAN'S ENERGY CRISIS

• Energy experts in Pakistan say that the current situation is just the tip of the iceberg. Pakistan has been facing this energy crisis for the past one decade. And none of the governments including the Pakistan Muslim League- (N) and Imran Khan-led Pakistan Tehreek-e-Insaf (PTI) could find a concrete solution for it. 
• PML- N had invited foreign investors to help establish power plants in Pakistan which would give them guaranteed returns. These plants were run on imported fuel. This policy not only made Pakistan risk averse to global supply issues, it also created a scenario where surplus power was generated which had to be paid for in dollars, even if the power was left unutilized.
• When Imran Khan-led PTI government’s strategy to devalue the dollar to contain the current account deficit had the side effect of triggering a surge in electricity generation costs, which increased as the dollar rose sharply against the rupee. This rise made it more difficult to afford the produced electricity.  On top of it, the stuck payments with power generation companies and then shortage of fuel also worsened the situation.

Both the governments also failed to tap on the renewable sources of power like wind and solar.

The current situation: The recent energy crisis has propelled the prices of electricity fuel in Pakistan by 100%. Shehbaz Sharif-led government says that it is in talks with several fuel suppliers including Russia, but admits that it has not been able to lock any deal so far to ease the power shortages. 

But as per a report by the The Straits Times, Pakistan had also signed up deals with Qatar in April for LNG supplies. These deals were cheap as compared to the current deals that are being offered to Pakistan. So, the decision to opt for cheaper LNG supplies was a logical one.

At present, even if Pakistan manages to resolve the balance-of-payments issue and arranges funds to import energy, it may face difficulty in procuring LNG due to unavailability in the market.

The current situation warrants long term policy decisions to rescue country’s power sector from a fiasco.