Dam-ned if we don’t

When it comes to economic issues, our leaders have time and again placed personal politics and vested interests ahead of the national economy. To illustrate our apathy, consider the case of the mother of all economic issues – our energy crisis. Over the years, either by design or through sheer criminal negligence, our energy mix – the various sources from which we produce our electricity – has evolved into one of the worst in the developing world.

Today the biggest bulk of our energy is produced from plants that run on imported furnace oil. This furnace oil is based on international market prices resulting in expensive energy being produced as well as the utilisation of our precious reserves of dollars. When our foreign reserves dwindle, our rupee comes under pressure and its value goes down thus making things even more expensive to buy and making life more miserable for the Pakistani citizen.

Another problem with this energy mix is that since our energy has become so expensive to produce, the government is forced to pay a subsidy lest it have an uprising on its hands. So let’s say the average price of all energy produced is Rs14/unit, the government only charges Rs10/unit with the remaining amount being a subsidy. This leads to further problems.

For starters the government either pays this subsidy by spending taxpayers’ money or through borrowing. The former comes with an opportunity cost. The government could have spent that money on schools, hospitals, highways etc. If it’s the latter then the burden of debt on each Pakistani continues to go up. Finally there is another way out for the government – not to pay the entire subsidy. This leads to what we all have become sick of hearing lately, the dreaded circular debt.

As a result we have crippling energy shortages because the plants stop producing energy as they run out of cash. Passing on the cost of this energy to consumers isn’t an option either because most industries and consumers won’t be able to afford such a high price.

Fundamentally our energy issue is not of energy availability but of energy affordability.

If foreign energy experts were to analyse our situation they might ask, what about hydel electricity? How would one tell them that we don’t like cheap energy or that by not storing waters of the monsoon and melting snows we somehow get votes? Is it not criminal the way our leaders have, over the years, played politics with this issue?

If our leaders could come together for constitutional amendments, the NFC Award, and a water accord in the last couple of decades, they could have come out with a workable political solution for this issue, a solution that would benefit the majority of Pakistanis in all the four provinces of the federation.

However, during the last few years when the loadshedding crisis went from bad to intolerably worse, we saw and continue to see little focus on hydel, the cheapest source of renewable energy.

The new government seems to be exploring alternate options to RPPs and thermal power production and is talking about solar and coal-powered generation. However, the stark reality is that Pakistan needs to add on average 5000MW each year. Why this amount? Well to grow our annual GDP at about more than seven percent we need roughly this amount of energy to be added to the national grid every year.

And we need to grow by seven percent on an annual basis so that our economy can come close to catering to the 2.5 million youth entering the workforce each year. If we don’t then our unemployment is going to keep on ballooning till God-forbid it bursts in a horrific manner. Hence, we have no choice.

Five-thousand MW each year can’t just come from thermal, solar, coal, nuclear, LNG, wind sources. Hydel has to be a major component of this or else our energy mix will remain such that it renders energy unaffordable for most. In a globalised arena, industries cannot operate with high-energy costs.

Jobs and growth are connected with affordable energy and it doesn’t take a genius to guess which mega infrastructure projects will result in lots of jobs. The cheapest source of energy and water storage? Dams. With dams, the energy produced will be Rs2-3 per unit compared to thermal power plants whose energy costs Rs18 per unit.

Studies for one dam have already been completed and this dam can be commissioned within five years, giving us very cheap 3600MW energy. We can change the name of the ‘you-know-what-dam’ to Bhutto Dam. Its management can be handed over to the federal government, supervised by a committee comprising credible experts – the majority from provinces other than Punjab. Electricity royalty can be divided the same way the NFC Award has been. Don’t tell me we can’t solve this politically.

This energy crisis can truly be transformed into a big opportunity provided bold leadership is shown. We are talking about $7bn to $10bn new investment that can enter the economy each year for the next several years just in the energy sector. To put that into perspective, the new government just inked a three-year loan deal with the IMF worth $5.3bn in order to buttress our dwindling foreign reserves.

National parties like the PPP, the PML-N and the PTI will have to take the lead on this and not let local politics and vested interests hijack this matter that is so vital to our national survival.

As always the question is: will politics continue to hamper and hinder our economic future just as it has hampered our effort against terrorism? Are we destined to just muddle along till we implode? Or will we come together as a nation and do what is needed so that our present and our future can both be salvaged? Hopefully, for all our sakes, it’s not already too late.

The writer is a director at a consulting firm. He tweets @jerryshah. Email: jarrar.shah@ gmail.com