Pakistan’s power sector confronts serious challenges in the form of institutional weaknesses, weak governance and financial sustainability. Despite having surplus supplies consumers are getting not only expensive electricity but sometimes have to face power outages due to inefficiencies in the power system. Inept corporate governance and unsustainable financial management in Pakistan’s power companies have led to a chronic shortfall between cash inflows and outflows famously known as circular debt. Presently Power sector’s circular debt ballooned to Rs 2.467 trillion or 3.8 percent of GDP and 5.6 percent of Pakistan’s total debt in the outgoing fiscal year, the Economic Survey for FY2022 revealed, posing a serious threat to the fiscal sustainability of the sector. Statistics showed that over the years, the debt fast grew in size. In 2008, it was recorded Rs 161 billion, in 2013, it was at Rs 450 billion then stood Rs 1.148 trillion in 2018. The Pakistan Economic Survey 2021/22 while quoting the Central Power Purchasing Agency (CPPA) fact said that by end-March 2022, the debt now stands at Rs 2.467 trillion. In the Economic survey, the government warns that if the circular debt grows at the same pace and is not muzzled, it is estimated to reach Rs 4.0 trillion by 2025. This demands the urgency of reforms in the energy sector. At the same time, the gas sector’s circular debt is also increasing. Dependence on liquefied natural gas (LNG) has increased in recent years due to depleting indigenous natural gas deposits. Over the past three years, the stock of the circular debt in the gas sector has nearly doubled to Rs650 billion increasing from Rs350 billion in 2018. The Experts of the sector identified that each year; hundreds of billions of rupees’ capacity payments are made to the independent power generators. But at the same time, besides capacity payments, the inefficiencies of the power distribution companies (DISCOs) are a main drag on the sector’s financial health owing to high losses and low recoveries.
It is said that the power transmission and distribution inefficiencies are hampering the sustainable deliveries of energy services, leading to higher energy prices and increased costs of doing business. Statistics also showed that installed electricity generation capacity also grew 11.5 percent (4,296MWs) in July-April 2021-22 to 41,557MW from 37,261MWs in the corresponding period of last year. Historically, Pakistan’s economic growth is constrained by bottlenecks in the energy sector. Pakistan’s energy requirements are increasing and demand for energy in the coming decades will rise substantially. Energy demand on this scale will put growing pressure on energy resources and distribution networks. A fundamental transformation of the energy system is the need of the hour, as dependency on the dominant fossil energy resources, mainly oil is risky. Energy security is essential because the kind of disruptions seen is a potential threat to our economic well-being. Exploration of the more indigenous and renewable resources is key to energy security. The Country is actively following the policy of a shift from conventional sources of energy to the utilisation of indigenous renewable and environment-friendly clean energy generation resources. Sources recorded that the percentage share of hydel generation in total installed fuel-wise capacity has marginally declined to 24.7 percent during July-April FY2022 as compared to its share in FY2021. The contribution of RLNG in the installed capacity grew to 23.8 percent in July-April 2022 from 19.66 percent. The percentage share of coal remained the same, although there is a rise in the installed generation from 4,770MW during July-April 2021 to 5,332 during July-April 2022. The percentage of contribution of gas fell from 12.15 percent during July-April 2021 to 8.5 percent in July-April 2022. There is a rise in the percentage share of renewable energy, which is a good sign for the economy also for the environment. The percentage contribution of nuclear power generation has grown to 8.8 percent during July-April FY2022 from 6.68 percent during July-April FY2021. The Share of wind power grew from 3.31 percent to 4.8 percent, while the percentage share of solar power grew from 1.07 percent in July-April FY2021 to 1.4 percent during July-April FY2022. On the other hand, in terms of the energy mix, the country’s reliance on thermal power generation, which includes imported coal, local coal, RLNG, and natural gas has been declining over the last few years, but its share is still the largest in the energy mix. Its percentage contribution has decreased from 62.5 percent during Jul-April FY2021 to 60.9 percent during Jul-April FY2022.
Similarly, the percentage contribution of hydel in electricity generation also declined from 27.8 percent in Jul-April FY2021 to 23.7 percent during July-April FY2022. The percentage share of nuclear grew from 7.2 percent during Jul-April FY2021 to 12.35 percent during July-April FY2022. The contribution of renewable sources in electricity generation grew from 2.4 percent during Jul-April FY2021 to 3.02 percent in the first 10 months of FY2022.