Abdul Rehman Niazi
In a recent speech at the International Hydropower Conference, Power Minister Awais Leghari provided an alarming assessment of Pakistan’s power sector, shedding light on the myriad of challenges that have long plagued the country. His comments are a stark reminder of the sector’s severe inefficiencies and the enormous economic burden that has been placed on consumers, industries, and the broader economy. Leghari’s critique of the existing power generation projects, and his outline of government plans for future reform, raises pertinent questions about the sustainability of the current system and the urgent need for comprehensive policy changes.
One of the most eye-opening statements from Leghari was his revelation that only a tiny fraction of the 17,000MW new power projects planned for the next decade meet the “least-cost” methodology. Specifically, only 87MW of these projects adhere to the principle of minimizing costs for consumers. The rest, according to the minister, are overpriced, further exacerbating the problem of rising electricity tariffs. This situation has led to skyrocketing electricity bills, hours-long power outages, and widespread frustration among consumers and businesses alike. Leghari’s stark assessment makes it clear that the country and its citizens can no longer bear the financial strain of expensive energy, which has been a long-standing issue in Pakistan’s power sector.
Leghari’s address also touched on the government’s intent to address the escalating costs associated with power generation. He announced that the government retained the “legal right” to terminate 10,000MW worth of projects from the 17,000MW expansion plan. These projects, which have not yet reached the financial close stage, are seen as a potential drain on national resources. The government aims to curb energy costs by reevaluating the feasibility and affordability of these projects, in line with the pressing need for cost-efficient solutions to Pakistan’s energy crisis.
Moreover, Leghari emphasized the importance of focusing on projects with strategic value, particularly in the context of national security. For such projects, he suggested that the additional costs above the least-cost principle should be financed by the federal and provincial governments, rather than burdening consumers. This would ensure that taxpayers, rather than the general public, would shoulder the financial responsibility for strategically important power initiatives.
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A particularly critical part of Leghari’s speech involved the Diamer-Bhasha Dam, a massive hydropower project currently under development. The minister raised legitimate concerns about the cost-effectiveness of this project, considering the substantial transmission and power generation costs associated with it. The transmission infrastructure alone is projected to cost around $3 billion, and integrating these costs into the existing tariffs could increase the national power rate by as much as Rs5 per unit. Given these figures, Leghari’s question—whether the benefits of the Diamer-Bhasha Dam justify the financial burden on consumers—highlights the need for a thorough cost-benefit analysis before proceeding with such monumental projects.
The challenges associated with large-scale projects like the Diamer-Bhasha Dam are multifaceted. Political instability, environmental concerns, and technical hurdles all contribute to the complexity of execution. These factors, along with the already strained financial resources of the country, necessitate a careful assessment of whether these projects can deliver long-term value without imposing an unsustainable cost on consumers.
The persistent problems within Pakistan’s power sector can be traced to a combination of factors, most notably inefficiency in power generation, a crumbling distribution infrastructure, ill-conceived tariff policies, weak revenue collection mechanisms, and rampant electricity theft. These systemic issues have led to a chronic state of disarray, which has burdened consumers and businesses alike.
At the heart of this dysfunction is the government’s central role in nearly every aspect of the power sector, from policymaking and regulation to power generation and distribution. Critics argue that this all-encompassing involvement has led to disastrous decision-making, driven by narrow political agendas rather than sound economic principles. A prime example of this was the rapid addition of power plants to the national grid without sufficient consideration for the necessary upgrades to transmission and distribution systems. This shortsighted approach has left the country with a massive underutilization of installed capacity, with only one-third of the 46,000MW installed capacity being used annually.
The lack of integration between power generation and distribution has created an environment of inefficiency and excess costs, which ultimately fall on the shoulders of consumers. As a result, the national economy suffers from high energy costs, an unreliable power supply, and hindered industrial growth.
In light of these challenges, Leghari’s recent remarks signal a potential shift in policy that could bring much-needed reform to the power sector. The minister stressed that future capacity additions would be determined by factors such as technology, demand, transmission infrastructure, and tariffs, with only least-cost projects being prioritized. This approach is a welcome change from the past, where political motivations and inefficiencies often drove decisions that worsened the country’s energy crisis.
Leghari’s commitment to focusing on cost-effective solutions, rather than adding unnecessary capacity, is an important step towards addressing the root causes of the sector’s problems. Additionally, his assertion that the government will no longer bear sole responsibility for power procurement is another positive development. By shifting some of the risk to the private sector, the government aims to foster greater competition and efficiency within the market.
While Leghari’s statements offer a glimmer of hope for reform, the road ahead remains fraught with challenges. Pakistan’s political landscape has historically derailed many well-intentioned reform efforts, and there is no guarantee that the new policies will be successfully implemented. The launch of the competitive electricity market, slated for March, is one such example. Although this market is designed to gradually phase out the government’s role as the primary buyer of electricity, it remains to be seen how effectively it will function in practice. Will it truly improve efficiency, reduce costs, and increase transparency in the energy sector? Time will tell.
Moreover, the government’s commitment to addressing inefficiencies must be accompanied by robust regulatory frameworks, investment in transmission infrastructure, and a crackdown on electricity theft. Only with comprehensive and sustained reforms can Pakistan hope to create a power sector that is financially viable, environmentally sustainable, and capable of meeting the growing demands of its population and economy.
In conclusion, Pakistan’s power sector stands at a critical juncture. Minister Awais Leghari’s remarks have underscored the deep-rooted problems that continue to plague the sector, from overpriced power projects to inefficiencies in generation and distribution. The government’s plans to focus on cost-effective, least-cost projects and reduce its role in power procurement are steps in the right direction. However, successful implementation of these reforms will require political will, effective regulatory oversight, and a commitment to long-term planning. Without substantial and sustained reforms, the burden on consumers and the economy will only continue to grow, making it increasingly difficult to achieve energy security and economic growth in Pakistan.
