What are the main causes of energy crisis in Pakistan? What measure do you recommend to address it?

Introduction

The International Energy Agency describes energy security as "the uninterrupted availability of energy sources at an affordable price." Pakistan has struggled on both counts. In the years after 2007, homes and factories endured long hours of load-shedding; after 2018, power became available but at prices many consumers and industries could not afford, while winter gas shortages became routine. The crisis is not caused by one factor but by weaknesses at every link of the energy chain, from fuel supply and generation to transmission, distribution, pricing and governance.

Overview

Pakistan's primary energy supply relies heavily on natural gas, oil and imported LNG and coal, with smaller shares of hydropower, nuclear and renewables. Domestic gas production has been declining since around 2012, so Pakistan began importing LNG in 2015. Electricity generation capacity now exceeds peak demand, but much of it is expensive and underused. Meanwhile, the power sector's circular debt has grown into one of the economy's biggest fiscal burdens, and gas-sector circular debt has also accumulated.

Main causes of the energy crisis

1. Depleting domestic gas.

Major fields such as Sui are declining, and new discoveries have not kept pace with demand, leading to winter gas load-shedding for households and industry. (Reference: Oil and Gas Regulatory Authority (OGRA), State of the Regulated Petroleum Industry; Pakistan Petroleum Information Service.)

2. Dependence on imported fuel.

Imported furnace oil, LNG and coal make electricity costs vulnerable to global prices and the exchange rate. The 2022 spike in LNG prices left Pakistan unable to buy enough fuel. (Reference: Pakistan Bureau of Statistics, petroleum import data; Finance Division, Pakistan Economic Survey 2022-23, chapter on energy.)

3. An expensive generation mix.

Thermal plants based on imported fuel dominate the mix, and capacity payments to IPPs must be paid even when plants are idle, pushing up the average tariff. (Reference: NEPRA, State of Industry Report 2023; Report of the Committee for Power Sector Audit, Circular Debt Resolution and Future Roadmap, 2020.)

4. An outdated transmission grid.

Bottlenecks in the National Transmission and Despatch Company's network prevent cheaper power from the south from reaching load centres in the north, and major blackouts occurred in January 2021 and January 2023. (Reference: NEPRA inquiry reports on the countrywide blackouts of 9 January 2021 and 23 January 2023.)

5. Distribution losses and theft.

Distribution companies lose a large share of electricity to technical losses and theft, and recover only part of their bills, especially in some regions. (Reference: NEPRA, Performance Evaluation Report of Distribution Companies; Power Division data on recoveries.)

6. The circular debt chain.

When DISCOs do not recover costs and subsidies are delayed, they cannot pay generators, who cannot pay fuel suppliers, creating a chain of unpaid bills exceeding Rs 2.3 trillion in 2023. (Reference: Ministry of Energy (Power Division), circular debt data, 2023.)

7. Inefficient end use.

Old appliances, inefficient fans and motors, poor building design and wasteful use of gas in households raise demand unnecessarily. (Reference: National Energy Efficiency and Conservation Act 2016; National Energy Efficiency and Conservation Authority (NEECA) reports.)

8. Fragmented governance.

Responsibility is divided among the Power Division, Petroleum Division, NEPRA, OGRA, provincial departments and many state companies, making coordinated planning difficult. (Reference: World Bank, Pakistan Power Sector Reform assessments; National Electricity Policy 2021.)

Recommended measures

1. Exploration and local fuels.

Offer attractive terms for oil and gas exploration, develop Thar coal for power and gasification, and tap shale and tight gas. (Reference: Petroleum Policy 2012 and its amendments; Thar Coal and Energy Board.)

2. A cheaper generation mix.

Shift to hydropower, solar, wind, nuclear and local coal, as planned in the IGCEP, and retire expensive oil-based plants. (Reference: NEPRA, IGCEP 2022-31; Alternative and Renewable Energy Policy 2019.)

3. Grid modernisation.

Invest in new transmission lines, smart grids and reactive power management to remove bottlenecks and prevent blackouts. (Reference: NTDC, Transmission System Expansion Plan; World Bank, Pakistan Development Update, 2023.)

4. Distribution reform.

Install smart meters, crack down on theft, and transfer management of DISCOs to provinces or private operators with performance contracts. (Reference: Power Division, anti-theft campaign, 2023; Privatisation Commission, DISCO privatisation programme.)

5. Breaking the circular debt.

Target subsidies to the poor through BISP data, pay subsidies on time, renegotiate IPP contracts and align tariffs with costs. (Reference: Power Division, Circular Debt Management Plan; renegotiated agreements with IPPs, 2020 and 2024.)

6. Energy efficiency and conservation.

Enforce efficiency standards for appliances and buildings, replace inefficient fans and motors, and promote efficient gas heaters. (Reference: National Energy Efficiency and Conservation Act 2016; Pakistan Energy Conservation Building Code.)

7. Gas pricing and allocation reform.

Raise gas prices for wealthier consumers, reduce cross-subsidies and allocate gas to its most productive uses, such as industry and power, rather than inefficient household heating. (Reference: OGRA, determinations of prescribed prices; IMF, Pakistan staff reports on gas pricing, 2023.)

8. One integrated energy authority.

Merging energy planning under a single ministry or authority with a long-term strategy would improve coordination. Pakistan created a combined Ministry of Energy in 2017, but planning remains fragmented. (Reference: Cabinet Division, creation of the Ministry of Energy, August 2017; National Electricity Policy 2021.)

Conclusion

Winston Churchill told the House of Commons in 1913: "Safety and certainty in oil lie in variety and variety alone." The same principle of diversity applies to Pakistan's whole energy system. Pakistan's crisis stems from falling gas output, dependence on imported fuel, an expensive generation mix, a weak grid, losses and theft, circular debt, wasteful use and fragmented governance. Each weak link requires its own fix, but all require a single long-term strategy implemented consistently. With local fuels, a cheaper and cleaner mix, a modern grid, reformed distribution, efficient use and coordinated governance, Pakistan can achieve energy that is both reliable and affordable.