It is a $ 21 billion question. How to swing around this size of cash as the Pakistani market is ready for such an investment in electricity to overcome its energy crisis. However, looking at the scale and severity of the worsening energy crunch, it will be no exaggeration to say that the sky is the limit.
Granted that some of the less-than-transparent electricity deals did lead to controversy and criticism against the government like Rental Power Projects (RPPs), nevertheless the return on investment will be fair, quick, and assured. The country cannot avoid taking major investment decisions in the power and energy sector, as the worsening crunch is biting deep into industrial, commercial and business output. It is one of the serious causes for pulling the FY-2011 GDP down to 2.3 percent.
The immediate target is to generate 6,950 megawatts (mw) of power according to Washington assessments. It will cost $ 21.8 billion. The US administration report Islamabad has just received highlights several projects to overcome Pakistan’s “widening energy crisis”. “The government of Pakistan needs at least $ 7.7 billion for completing six thermal power projects on a top priority basis,” it says. “An additional $ 14.1 billion investment should come from the private sector for streamlining the energy sector of Pakistan,” the report also says.
According to the report, “Pakistan has identified the reasons, which resulted in worsening energy crisis in recent years but it did nothing to attract investment to change the situation in its favour by completing the much-needed energy-producing projects.”
The report stresses, “Pakistan has to ensure a steady implementation of energy sector reforms and fast tracking investment to overcome its energy crisis. It is a daunting task but not an insurmountable challenge. Pakistan needs full support of its international development partners to have the desired level of investment for the energy sector reforms and overcome the energy crisis in a given time-frame of three years.”
The delay in creating new capacity and to bring it on line is now hurting badly. The energy crisis was identified five years ago. But lack of a concerted focus on “essential institutional and governance principles in the energy sector, insufficient maintenance and stilted capacity expansion” in recent years has resulted in a serious crisis in Pakistan. Washington has also severely criticised the government of Pakistan policy of “taking decisions relating to energy sector on political grounds, which is going to widen gas load-shedding during the upcoming winter season.”
Washington also questions the government policy of supplying gas to some commercial sectors like fertiliser for use as an input. It clearly advises the government to do away with this policy of preferring one sector to another so that foreign investments reach key projects of energy within three years to overcome its energy crisis.
Realising the potential of the Pakistani energy market, foreign investment plans are beginning to be unveiled. The Austrian Minister for Economy, Dr Reinhold Mitterlehner, for instance, assured Raja Pervaiz Ashraf, Pakistani Minister for Water and Power this week that his country plans to invest in Pakistani hydel power and alternative energy development projects.
Austria will also provide technical assistance in hydropower generation projects. Several Austrian companies are already working in the energy sector in Pakistan, and have expressed keen interest to expand their business, while new ones are also interested in this sector, Dr Mitterlehner said. Austria also has expertise in manufacturing hydel machinery and has offered Pakistan to consider it for its mega hydel projects, he said.
Ashraf, while welcoming Austrian investment, joint ventures and cooperation, explained to the Austrian minister and energy officials that it plans to change its energy mix, and is now focusing on hydel, coal, wind and solar generation to provide cheaper and reliable power to the consumers. Pakistan will also facilitate the Austrian manufacturers of hydel and other energy equipment.
At the same time, at the Pakistan-China Joint Commission on Economy, Trade, Scientific and Technical Cooperation meeting this week, China announced it will invest $ 13.2 billion in Pakistani projects in energy, water, industry, agriculture, and fisheries sectors. Gan Hucheng, China International Trade Representative from the Ministry of Commerce, and Pakistani Finance Minister Dr Hafeez Shaikh, jointly chaired the Commission’s sessions. Energy and other projects are expected to be identified shortly.
The Asian Development Bank (ADB), which is also actively assisting Islamabad in its efforts to overcome the energy crisis, released this week the second and last tranche of $ 302 million out of its $ 810 million credit for the energy sector. The amount will be used for extension, augmentation, setting up new substations and laying new transmission lines by eight state-owned power companies.
Keeping in view the large gap between demand and supply and the speed with which it is widening, Pakistan is also moving in the field of generating power from its vast coal deposits at Tharparkar in southern Sindh. Dr Samar Mubarakmand, who was the lead scientist of the team that staged Pakistan’s nuclear tests on May 28, 1998, is working on the coal-based energy project. “Pakistan can produce 50,000 megawatts of electricity and 100 million barrels of diesel just through gasification of its coal reserves,” he says.
The country has started developing this energy sector as part of its plans to expand power generation and improve the energy mix. Whether it is supply of hydel machinery, equipment for other sources of energy or the installation of power sub-stations and transmission lines, Pakistan offers a huge potential for investors and businesses at home and abroad. The business will be big, and this is true for several years to come.