En­ergy is a $21 bil­lion ques­tion

The Pak Banker - - 4editorial - Muham­mad Aftab

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

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 lessthan-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 Pak­istanChina 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.

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