Pakistan: Electricity Woes!

By Lal Khan

The PML (N) government that came to power with a ‘heavy mandate’ in 2013 has been one of the most unstable and fragile regimes in Pakistan. What has sustained the regimes is the domination of non-issues braced and hyped by the opposition parties mainly the PTI. The painful fact is that most opposition parties in the parliament have no real differences on the basic economic and class policies of the Nawaz regime. However from the very first day PML (N) government has been plagued by the long and sustained electricity outages as this crucial issue more than any other actually affects the lives of ordinary people and this, in turn, has been provoking mass protests and now is actually posing an existential threat to this PML (N) government. Apart from health, education, water, sanitation and innumerable socio-economic miseries inflicted by the system on society the electricity woes have brought out mass outbursts more than often.

However, these mass retaliation protests have been sporadic and regional. The government has been able to pump in more electricity temporarily to dissipate the outbursts with its makeshift measures that cannot provide a lasting solution to the anguish of load shedding and dearth of power supply for the needs of the society. The masses continue to suffer. Nawaz and his coteries have been continuously boastful of massive new power generation projects and a continuum of deadlines for and end to power shortages in Pakistan. The main reason is the continuous increase in the utilisation capacities that cannot be met with the existing infrastructure and pace of new generation. However the root cause of the problem is not even discussed in the mainstream media and the political rhetoric of our elite classes.

The elephant in the room is the privatisation of electric supply and other utilities in the last three decades and astronomical increases in the tariff prices. This privatisation has deprived society from their basic collective needs with vast majority does not have the capacity to meet these excessive tariffs and the drive for huge profits of the Independent Power Producers (IPP) and other imperialist and local corporate sector investing in power generation. This production is only to extract massive profits out of this essential prerequisite of human existence particularly during these scorching periods of 50 plus Celsius.

Ever since the privatisation, the electricity production moved towards higher profit rates. Despite being the cheapest source of electricity, the high capital costs of hydro generation has slanted the hydro-thermal ratio in the power generation mix and resulted in a significant increase in costs with rising ratio of profits. The drastic shift towards the private sector power generation began in the 1990’s when the second Benazir government opened up the sector to imperialist private power producers the so-called IPP’s. The Nawaz Sharif, Musharraf and subsequent regimes continued the policy with their own capitalist protégés getting access to this cruel extortion from an impoverished people.

An article in the Financial Times dwelt on this shift of private production in 1994. It wrote, “helped by the World Bank, “sweetened” its energy privatisation with attractive conditions… It guaranteed a 12 to 15 percent annual return (indexed in dollars, not rupees), gave tax breaks and paid interest on private funding – more expensive for the government than providing the funding itself…The deal was too good to be true for investors.”

The deals signed with the imperialist IPP’s were clearly in favour of these corporate vultures who paid hefty kickbacks to the politicians and generals in power to extract these contracts. These regimes gave those guarantees to these investors allowing too much capacity to be built and guaranteed the same return by the Pakistani state exchequer on that extra capacity, whether it was used or not.

The FT article continues, “The model turned out to be badly constructed in terms of creating value for the government and people of Pakistan. Even in an environment of economic growth and efficient energy generation, it would have been hard for the government to finance the plan. But since both have been absent, it became nearly impossible to pay for privatised energy. Most private investors chose to build oil-powered plants because of their low construction costs and short lead times. Variable costs, and therefore prices to consumers, are at unsustainable levels…No wonder many consumers can’t afford to pay their bills.”

If the ruling classes are corrupt and stashing away their obscene wealth the masses are impoverished and the state is laden with massive debt and would go bankrupt if its tries to get out of this vicious cycle of loans, debts and interest payments to the imperialist institutions such as the IMF and the World Bank. Pakistan’s so-called circular debt is only getting worse because of rising interest costs and dollar-rupee appreciation.

In a capitalist system there is no way out from this quandary. As growth stalled, the government could no longer meet its commitment made on extortionist terms with these corporate bosses. The IPP’s often start shutting down power plants, imposing darkness across Pakistan. Masses have to endure daily power outages in spite of the country having an excess generating capacity of almost 35 per cent.

The desperation to end power shortages fearing mass revolts led to policies that offered investors far too generous tariffs, burdening the ordinary consumers with some of the most expensive electricity in the region. Pakistan has some of the highest power prices in the region, at $0.13 per unit of electricity, compared with $0.12 in India, $0.11 in China and $0.09 in Bangladesh. Furnace oil is burnt to produce 40 percent of the supply, with hydroelectric dams accounting for 30 per cent and gas 25 per cent.

If there is a financial crunch in power generation there is an even bigger crisis in its distribution. Even if there is an increased power production the rotten and obsolete transmission and distribution infrastructure that cannot cope with this new influx of energy. The state has been plundered and almost broke, lurching on debt. It does not have the financial capacity to construct the infrastructure on a modern and advanced basis to transmit electricity across the country.

In its present decayed condition the distribution infrastructure is barely able to cope with the existing power generated. Transmission lines, cables and transformation copper parts are decrepit with neither the will nor the financial capacity of the various capitalist regimes to execute adequate upgrading, repair and maintenance. Even in the metropolitan areas the transformers are overloaded and frequently bust up with little or no maintenance by the cash-strapped state owned distributors.

Such is the debilitated condition of the transmission infrastructure that even the private sector is reluctant to go for huge investment and the long delays of higher profits in an impoverished society with little or no capacity to buy the exorbitantly priced electricity in Pakistan. The aggrandised China Pakistan Economic Corridor (CPEC) is also mainly concentrating on power generation projects rather than the transmission lines. These are certain plans of laying a new transmission networks from North to South but this long term projects has little chance in wake of a worsening debt and financial deficits crisis that is plaguing the Pakistani state.

The Chinese corporate investors are not here to provide cheap and reliable electricity supply but to extract higher rates of profits. It’s another manifestation of the distorted and uneven pattern of industrial and economic development of capitalism in Pakistan that the timelines of power generation and transmission have not been coordinated effectively. Even with all this din of development there is no new infrastructure initiative planned to transmit power to energy-starved Balochistan that currently does not have the capacity to bear electricity transmission beyond 500MW. Meanwhile, the demand for electricity has been soaring at a rate of 10 percent every year, further exacerbating the energy crisis.

It is true that Pakistan needs more electricity generation from low cost fossil fuels like natural gas and coal instead of relying on furnace oil and diesel that have been responsible for the so-called circular debt in the power sector in the recent years and becomes a drain on national economy. But electricity like all other businesses in this system is generated for profits, not for the fulfilment of the needs of society.

The reality is that profits of the bankers, foreign and local investors and kickbacks of the bourgeois politicians and military’s capitalist enterprises can only be guaranteed within the confines of this system that shackles the toiling classes and the oppressed masses. The structures of the economy and the state are geared in the interests of these privileged classes. For the society to have access to cheap and efficient electricity supply the power generation system and the banking and financial institutions that control and own the country’s wealth have to be expropriated by the state. But such a state has to be a based on workers democratic control and management. It will be a society where all production, services and agricultural sectors function for the realisation of human need and not for the lust of profits of the rich and the mighty.