Posts Tagged ‘ PML-N ’

Priority in Pakistan: Turn On Lights

By Saeed Shah for The Wall Street Journal

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When Nawaz Sharif starts his new term as Pakistan’s prime minister on Wednesday, 14 years after he was ousted in a military coup, he will focus on turning on the lights in a nuclear-armed nation that has been increasingly starved of electricity.

Power outages of 12 to 20 hours a day have crippled industry and made life miserable for households, a problem that worsened under the previous government of the Pakistan Peoples Party. Electricity shortages cost Pakistan some $13.5 billion a year, equivalent to knocking 1.5 percentage points off the economic-growth rate, Lahore’s Beaconhouse National University said in a report this year.

After Mr. Sharif is sworn in, he will deliver a speech outlining his strategy for solving the electricity emergency through wide-ranging intervention, bond sales and privatizations, aides said. The financing of the electricity rescue plan would be laid out in the budget to be announced next week by incoming Finance Minister Ishaq Dar, they said.

The new administration plans to pay off what it says is $5 billion in debt that has paralyzed the industry, build new power plants and privatize the sector in a multibillion-dollar overhaul that could attract foreign investor interest, the aides said.

The challenges are great. The previous government poured billions into the sector without eliminating the debt or significantly increasing the supply of electricity. The industry is riddled with corruption and depends on expensive oil for power generation, instead of cheaper gas or coal.

The most pressing issue is the chain of so-called circular debt that runs through the sector: The government keeps the price of electricity to the consumer below the cost of production, but can’t afford to make up the shortfall. It means that oil importers are owed money by power plants, which are owed money by distribution companies, which in turn are owed money by consumers.

“First, we need to write a check,” said Miftah Ismail, an energy adviser to Mr. Sharif, who drew up the energy policy in the party’s election manifesto. “We will pay off the stock of circular debt. It is choking the system. No fresh investment will come into Pakistan unless you get rid of circular debt.”

Although the incoming government has given the level of this debt at $5 billion, a government think tank, the Planning Commission, issued a report in March this year placing it at $9 billion at the end of 2012.

The new administration would borrow the money from banks and also take on the debts owed to the banks by various energy companies and government-owned entities, Mr. Ismail said. Then the government would plan to tap domestic and international bond markets.

A domestic bond issue picked up by local banks would be the most likely scenario, said Ashraf Bava, chief executive of Nael Capital, a brokerage in Karachi. Pakistan would need to improve its credit rating and balance of payments before approaching international capital markets, he said.

“The local banks will have no choice. They’ll have to do it,” said Mr. Bava. “Obviously they’ll be offered a decent return.”

Pakistan, a country of 180 million people, is currently producing some 11,000 megawatts of power, though that dropped last month to less than 9,000 megawatts, compared with demand of at least 17,000 megawatts.

By comparison, installed generation capacity in Indonesia, a country of 240 million people, is 41,000 megawatts, according to a 2012 report from PricewaterhouseCoopers.

Pakistan’s supply shortfall results in power being switched off to households and industry for part of each day on a rotating basis across the country—outages known as “load shedding.”

After paying off the debt, the new government plans to pursue a three-pronged strategy, the aides say. The government would aim to cut line losses and electricity theft, shift power plants from oil to coal, and eliminate subsidies to consumers. Pakistan currently charges consumers around 9 cents per kilowatt-hour for electricity that costs 12 to 14 cents to produce.

Those who use minimal amounts of electricity would continue to get power cheaply, a cost that would be borne by the full fare paid by heavier users—including the middle classes, who form Mr. Sharif’s core constituency, as well as Pakistan’s elite. But if the plan works, Mr. Sharif’s aides said, the cost of power production and prices would come down again.

“There’s no reason why we should be subsidizing those who can afford to run air conditioners,” said Mr. Ismail.

Mr. Sharif’s plan envisages converting three or four of the biggest power plants, which currently burn oil, to coal. Experts estimate such a plan would cost about $2 billion but would pay for itself in savings in about a year.

New coal-burning power stations would also be commissioned, which the incoming government says would take around three years to come onstream. Government-owned generation plants and the grid companies would be put under new management and privatized.

“We will nibble at this problem from many angles as we go along,” said Sartaj Aziz, an adviser to Mr. Sharif on finance and a former finance minister.

Foreign companies rushed into Pakistan’s electricity sector in the 1990s, when new private generation plants were allowed, on lucrative terms. Oil prices were low at the time, so oil-burning plants were built.

However, frequent changes in governments and policies that followed, together with the circular debt issue, chased away most of the foreign interest. The last major American investor, AES Corp.,sold out in 2009.

GDF Suez of France and Malaysia’s Tenaga Nasional Berhad are the remaining foreign firms active in Pakistan’s energy sector.

Naveed Ismail, an independent energy-sector expert who previously worked with the government, said that 48% of Pakistan’s thermal generation came from burning furnace oil, the highest such proportion among any major countries, while contribution from much cheaper coal, the main source of generation in India or China, was close to zero.

“Pakistan just has to learn from the rest of the world. It doesn’t have to reinvent the wheel,” he said. “The issue is producing affordable electricity. No new capacity should be added unless it brings down the average cost of power.”

Helping Pakistan with its electricity crisis has been a major focus of American aid in recent years. Since October 2009, the U.S. has spent $225 million on energy projects in Pakistan, according to the U.S. Embassy in Islamabad, adding more than 900 megawatts to the country’s generation, with schemes for upgrading power plants and dams.

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Pakistan’s Power Woes

By Huma Imtiaz for Foreign Policy

Pakistan’s power crisis has become a catastrophe. Power cuts of up to 14 hours a day have become the norm in Pakistan. In Karachi, four patients admitted in the largest public hospital died when the hospital’s backup generator failed after prolonged cuts. Riots have engulfed Punjab, and other major cities across the country, as the government wrings its hands and tries to get the situation under control. Allegations have flown between the leaders of the two major political parties — the Pakistan Muslim League (Nawaz) and the ruling Pakistan People’s Party (PPP). The PML (N) — has accused the PPP of being responsible for the crisis. In turn, the PPP has accused the PML-N of instigating the violence.

Riots over power cuts in the country, known as “load shedding,” have now become a matter of routine. In neighborhoods and cities across Pakistan, hundreds have taken to the streets to vent their anger at the frequent load shedding. This time around though, the PML-N, perhaps to apply more pressure as a political tactic against its rival PPP, has stepped in, and is supporting the protestors.

But as the flurry of allegations continues, the problem at hand grows more serious. Dubbed the circular debt issue, power companies have racked up billions in unpaid dues to petroleum companies, which supply them oil to run their powerhouses. On Sunday, Pakistan State Oil (PSO), tired of waiting for the dues long promised to them, decided to stop the petroleum supply to the power companies, leading to an increase in the already inhumane cuts.

While the Government of Pakistan (GoP) has now released some funds to appease PSO, this is not a long-term solution. The Federal Minister for Water and Power Naveed Qamar responded to the most recent protests by saying that there were no quick fixes, and then turned around and announced that the situation would improve in 24-36 hours. Last week in Washington DC, the Finance Minister of Pakistan Hafeez Sheikh solemnly announced that the government understood the severity of the circular debt issue, and would resolve it in the weeks to come. But with a growing fiscal deficit, and a refusal of the Asian Development Bank to fund programs in Pakistan after the GoP decided to end their International Monetary Fund (IMF) loan program, how Pakistan plans to resolve the circular debt issue is anyone’s guess.

One solution, according to Prime Minister Yousaf Raza Gilani, was that the United States “should help Pakistan solve its energy crisis if it wanted better ties.” The United States has previously said that it is investing in dams in Pakistan to help add to the power grid, and has helped in the reconstruction of existing dams in the country.

However, Pakistan needs to stop looking towards the West for a solution (or a scapegoat), and perhaps redirect its attention to how to fix its problems internally first — perhaps by collecting payment of unpaid bills, or cracking down against those stealing electricity. First, though, it has to deal with the political ramifications of these protests. The PML-N has played its cards right; by blaming the political center of which it is no longer part, it has easily scored political points while the PPP becomes the fall guy — and to an extent, perhaps deservedly so. Pakistan’s government, in turn, can only do so much. Strapped for cash, it barely has the funds to invest in power generation, and in cases where it has, such investments have barely led to a meaningful increase in the electricity grid.

Additionally, in the face of all of these problems, if Pakistan raises power tariffs on those that have been suffering for the last many years, the law and order situation could become even more perilous.

Meanwhile, the Pakistani population continue to take to the streets, hoping that it might eventually lead to the light bulbs burning bright again.

Huma Imtiaz works as a correspondent for Express News and is based in Washington, DC.

Pakistan must stop treating India as ‘biggest enemy’: Nawaz Sharif

As Reported by The Economic Times

As Pakistan’s powerful military held out threats to India, former Prime Minister Nawaz Sharif has called for reappraisal of ties with its neighbour to move forward and progress, saying Islamabad must stop treating New Delhi as its “biggest enemy”.

Sharif, who was earlier involved in talks with India when the Kargil crisis erupted, also sought a probe into the 1999 conflict with India.

The former Prime Minister, who is the chief of main opposition PML-N party, is currently on a three-day visit to southern Sindh province where he made the remarks during an interaction with the media in Karachi yesterday.

He called on the government to also conduct an inquiry into the 2006 killing of Baloch leader Nawab Akbar Bugti in a military operation and the carnage in Karachi on May 12, 2007 that killed over 40 people who tried to rally in support of then-deposed Supreme Court Chief Justice Iftikhar Chaudhry.

Sharif, whose government was deposed in a military coup led by former President Pervez Musharraf in 1999, reiterated his demand for the budgets of the military and the ISI to be placed before Parliament for scrutiny in line with the practice in other democracies.

He said one of his biggest regrets was not taming the powerful military when he was Prime Minister in the 1990s.

The Parliamentary resolution calling for an independent commission to investigate the killing of al-Qaeda leader Osama bin Laden in a US raid on May 2 was the first step towards making Parliament a sovereign body, Sharif said.

“We need structural changes and this inquiry has provided an opportunity to move forward and put the country on the right track, correct its direction by putting our house in order, establish the rule of law and bring all institutions under civilian control,” Sharif said.

If the government fixes responsibility for the Abbottabad incident and punishes those found guilty, a message will go out to the world that the people of Pakistan will not brook another embarrassment like the US raid, he said.

Sharif spoke out against the recent alliance forged by the ruling PPP and the PML-Q, both of which are rivals of his PML-N in Punjab and at the centre.

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