Give a critical review of Pakistan Energy Policy 2013 - 2018

Introduction

UN Secretary-General Ban Ki-moon described energy in 2012 as "the golden thread that connects economic growth, increased social equity, and an environment that allows the world to thrive." In 2013, that thread was broken in Pakistan. Cities faced load-shedding of up to 12 hours a day, villages even more, and industries closed or ran below capacity. The government elected in May 2013 made ending the energy crisis its top priority and adopted the National Power Policy 2013. Over the next five years, the policy succeeded in adding generation capacity and largely ending load-shedding, but it failed to fix the structural problems of the power sector, leaving behind circular debt, expensive electricity and heavy capacity payments.

Overview

The National Power Policy 2013, approved by the Council of Common Interests in July 2013, set clear targets for 2017: eliminate the supply-demand gap and load-shedding; reduce the average cost of generation from about 12 to 10 US cents per unit; cut transmission and distribution losses from about 25 to 16 per cent; raise bill collection from 85 to 95 per cent; and lower subsidies by shifting the fuel mix from expensive oil to coal, gas and hydropower. In June–July 2013, the government paid about Rs 480 billion to clear the power sector's circular debt. The policy was supported by the China-Pakistan Economic Corridor, much of whose early investment went into power projects.

Achievements of the policy

1. Ending load-shedding.

By 2018, scheduled load-shedding for most urban and industrial consumers had ended, as generation finally exceeded peak demand. (Reference: Ministry of Energy (Power Division), statements and load management data, 2018; NEPRA, State of Industry Report 2018.)

2. Capacity addition.

More than 10,000 MW of new generation capacity was added between 2013 and 2018 through public, private and CPEC projects. (Reference: NEPRA, State of Industry Report 2018; Ministry of Finance, Pakistan Economic Survey 2017–18, energy chapter.)

3. LNG imports.

Pakistan began importing liquefied natural gas in March 2015 through the Port Qasim terminal and signed a 15-year deal with Qatar in February 2016, easing the gas shortage for power plants and industry. (Reference: Ministry of Petroleum and Natural Resources; Pakistan State Oil-Qatargas agreement, February 2016.)

4. Coal and CPEC projects.

Efficient coal plants at Sahiwal (2017), Port Qasim (2018) and later Hub and Thar were built under CPEC, diversifying the fuel mix away from furnace oil. (Reference: CPEC Authority, energy projects; NEPRA tariff determinations.)

5. Hydropower.

The Neelum-Jhelum (969 MW) project and Tarbela's fourth extension (1,410 MW) came online in 2018, adding clean and cheap electricity. (Reference: WAPDA, project completion reports, 2018.)

6. Clearing circular debt in 2013.

The one-time payment of about Rs 480 billion revived idle plants and quickly reduced load-shedding in 2013–14. (Reference: Ministry of Finance, Pakistan Economic Survey 2013–14.)

7. A better energy mix.

Efficient RLNG-based plants at Bhikki, Balloki and Haveli Bahadur Shah (about 3,600 MW combined) replaced expensive oil-fired generation, reducing the cost per unit of fuel. (Reference: NEPRA, State of Industry Report 2018; National Power Parks Management Company.)

8. Private and foreign investment.

Attractive tariffs and guarantees drew private and Chinese investors into the power sector, mobilising billions of dollars. (Reference: Private Power and Infrastructure Board (PPIB), projects data; Board of Investment.)

Shortcomings of the policy

1. The return of circular debt.

Circular debt in the power sector rose again to about Rs 1.1 trillion by mid-2018, because underlying problems of losses, poor recovery and unpaid subsidies were not fixed. (Reference: Ministry of Energy (Power Division), circular debt data, 2018; IMF, Pakistan Article IV Consultation, 2019.)

2. High transmission and distribution losses.

Losses remained around 18 per cent, far above the target of 16 per cent, with some distribution companies losing over a third of their electricity to theft and technical faults. (Reference: NEPRA, State of Industry Report 2018, DISCO performance.)

3. Costly capacity payments.

Contracts guaranteed payments to power producers whether or not electricity was used. As capacity grew faster than demand, these capacity payments ballooned, a burden that grew heavier in later years. (Reference: NEPRA, State of Industry Reports 2018–2023; Committee for Power Sector Audit, Circular Debt Resolution and Future Roadmap report, 2020.)

4. Expensive imported fuels.

Reliance on imported LNG and coal exposed Pakistan to global price and exchange rate shocks, as seen when prices surged in 2022. (Reference: Ministry of Energy; IMF staff reports, 2022–2023.)

5. High tariffs.

The cost of electricity for consumers and industry remained among the highest in the region, hurting exports and households. (Reference: World Bank, Pakistan Country Economic Memorandum, 2022; All Pakistan Textile Mills Association comparisons.)

6. A weak transmission network.

Generation capacity was added faster than the transmission and distribution network could carry it, leaving plants under-used and causing breakdowns. (Reference: National Transmission and Despatch Company (NTDC), Power System Statistics; NEPRA reports.)

7. Governance and privatisation failures.

Plans to privatise or reform distribution companies were not implemented, and political interference and weak management continued. (Reference: Privatisation Commission of Pakistan; IMF Extended Fund Facility reviews, 2013–2016.)

8. Neglect of renewables and demand management.

Early solar projects such as the Quaid-e-Azam Solar Park were criticised for high tariffs and low output, and little was done on energy efficiency and conservation. (Reference: NEPRA tariff determinations for Quaid-e-Azam Solar Park, 2015; Alternative Energy Development Board reports.)

Lessons and way forward

The 2013–2018 policy proved that Pakistan can add generation quickly, but also that capacity without reform creates new crises. The lessons are clear: reform distribution companies and reduce theft; align new capacity with demand and transmission; renegotiate costly contracts; shift towards local and renewable sources such as hydropower, Thar coal, solar and wind; and keep tariffs affordable through efficiency rather than subsidies. Later policies, such as the Alternative and Renewable Energy Policy 2019 and the Indicative Generation Capacity Expansion Plan, began to address these issues.

Conclusion

President Dwight Eisenhower remarked in 1957: "Plans are worthless, but planning is everything." The National Power Policy 2013 was a serious plan with clear targets, and it achieved its most visible aim: ending load-shedding. But its narrow focus on adding capacity, without fixing losses, recovery, governance and contracts, created a costly legacy of circular debt and high tariffs. Pakistan's energy future depends on learning from both its successes and its failures.