What is electricity crisis in Pakistan?

The power sector in Pakistan can be broadly classified into GENCos, IPPs,
NTDC and Distribution Companies.

1. What has caused it?

Pakistans existing power generation capacity is around 23,000MW, more
than the peak hours demand, but the agonizing power outages keep going
on because the capacity is not being fully utilized for lack of financial
resources. Officials say that around Rs2 billion are needed daily to run the
power plants on full capacity.
Lack of financial resources is the main reason for the ongoing electricity
loadshedding in the country, as the total installed generation capacity of
Pakistan including all sources is almost 5,000MW in excess of our demand
in the current season which is maximum 17,000MW in peak hours, an
official said. The average demand around the year is just 14,500MW, he
added.
Energy experts say that factors like incompetency and mismanagement too
contribute to the 12-15 hours power shutdowns in most parts of the country,
but the most key reason is lack of funds. They say that many of the oil-fired
power generation plants are not running on full capacity because there are
not enough funds to pay for fuel. Hence, the increased thermal power
generation is the major reason for the cost-recovery tariff to continuously
increase. Power generation companies are not buying furnace oil from PSO
saying they dont have money for it.
There are four major power producers in country: Water & Power
Development Authority, Karachi Electric Supply Company, Independent
Power Producers and Pakistan Atomic Energy Commission. According to
Wapda officials, electricity produced in Pakistan is from three main sources,
i.e, thermal (gas/furnace oil) 13,637 MW (65% of total), Hydel 6,654
MW (31% of total) and Nuclear 812 MW (4% of total). They said that
hydel electricity generated by WAPDA varies between two extremities
minimum 2,414 MW and maximum of 6,761 MW, depending upon the river
flow.
It is mismanagement, lack of political will and lack of funds, not the

insufficient installed generating capacity which is worsening energy

problems in Pakistan, said former Wapda chief Syed Khalid Sajjad.
Khalid, who is presently chairman of the Institution of Engineers Pakistan
Lahore Centre, observed that many public and private power producers
have shut down their power plants due to the suspension of fuel supply by
Pakistan State Oil, as the oil company is demanding payment of outstanding
billions of rupees from the power producers before resuming fuel supply.
When asked why government is going for installation of new power plants
instead of utilizing available ones, he said the present plants are outdated
and have become inefficient.

2. What is being done now?

GOP is trying to solve the load shedding problem in Pakistan by establishing
new power plants to increase the power generation capacity of the system.
The major issue is not the shortage of energy, rather the supply of
electricity.

3. What will be the strategy to solve this problem?

The government of the former Prime Minister, Yousuf Raza Gilani, tried to
counter the circular debt through electricity load shedding, but that hit
industry by pushing up production costs by more than 30 per cent.
The recent government manages power shortages by cutting supply for
hours to industrial and domestic users.
What is needed is to increase power generation and improve transmission
and distribution system. Like the previous governments, the Sharif
administration is mainly focusing on generation side without touching the
key issues related to the transmission and distribution of power. In its
annual report released this month, the State Bank of Pakistan points out
that the more binding bottleneck in the energy sector is distribution, not
generation, and without upgrading the existing distribution network, any
addition to generation capacity and even the settlement of the circular debt
could not ease load management on a sustainable basis.
The central banks report regrets that policymakers continue to emphasize
adding more generation capacity instead of addressing core issues such as

price distortion, high generation cost and inefficiency of the distribution

system.
The circular debt problem cannot be resolved without restructuring and
overhauling the power sector. Electricity supply shortages stem from
distorted pricing, rampant power theft, incompetent management and poor
governance. It is the lack of political will and administrative inabilities on
the part of the government that pushed the country into the acute energy
crisis.
The government will have to show political will by making hard and
unpopular decisions. Such decisions may include elimination of subsidies,
cutting free supply of electricity to WAPDA employees and raising power
tariff and gas prices to create additional revenue.1
The management of government-run DISCOs should either be privatized or
placed under control of provincial governments.
Lack of creating a decentralized system of governance is at the heart of

the problem. Efficient power sector reform cannot be pursued with this
centralized system that is run by a ministry. Decentralized and
independent entities must be run on corporate lines with corporate
management without government or ministerial interference. Technology
is part of the solution as it allows for improved monitoring, measurement
and payments. The decentralized system needs an able, competent,
independent and empowered regulator who is responsible and accountable
for the efficiency of the system and not just tariffs. The tariff system must
be reviewed continuously to ensure that due costs be passed on to
consumers, elimination of cross subsidies, timely fuel price adjustments and
artificial loss provisions. The question of uniform tariffs should be done
away with through careful planning and research. Subsidy if any should be
targeted to the poor only and not as currently available to all. THE CAUSES
AND IMPACTS OF POWER SECTOR CIRCULAR DEBT IN PAKISTAN III
With these improvements the system can be made solvent over a period of
time. Then investments will start flowing in not only for increase of capacity
but also for more efficiency including a better fuel mix.
1 http://www.thenational.ae/business/economy/circular-debt-leaves-pakistan-in-thedark#page2

Some interesting facts:

The peak hours demand in summers is around 19662 MW. Whereas, the
installed generation capacity of the system is 24,375 MW as of 2014. Source
(State of Industry Report 2014)