Political Economy of Energy Sector Reforms in Pakistan Dr. Vaqar Ahmed Sustainable Development Po...
Outline• Situation Analysis• Energy Governance• Solutions Available• Implementation 2
Situation Analysis• Primary energy consumption has grown by almost 80 percent• Energy mix skewed in favor of depleting gas...
Cost of Not Taking ACTION• Impact of Energy Crisis on Pakistan’s: – Economy: Additional USD 35 billion investment need...
Cost of Not Taking ACTION (cont..)• Energy management and national integration – Tensions between Islamabad and Balochist...
Three Broad Reform Areas 6
I. Energy Governance• Independence of boards• Induction of professional management• Strengthening of regulatory bodies ove...
II. Energy Pricing• Phase out subsidies • Hidden Subsidies • Cross Subsidies • Targeted Subsidies• Rationale for pricin...
III. Government’s Role in Energy Sector Limiting Government should Government must Government...
Sequencing of Solutions Short Term Medium Term Long Term• Curtail power sector • In...
What about External Solutions? 11
While TAPI and other Central Asian prospects will be driven by geo-politics, are there any medium term solutions? ...
Trade in EnergyRegional Prospects (e.g. SAARC) 13
Trade in Energy (SAARC) EfficientPetroleum Infrastructu...
Synchronizing National Policies• Joint techno-economic evaluation of opportunities and determination of pre-requisites• E...
India – Pakistan Power Trade• Transmission lines through Wagah-Attari border• Surplus pockets in Indian Punjab (and downwa...
Implementation !! Who will do it? 17
Implementation• Issue of rent-seeking – Rental power plants debacle – Who steels power? [98.5% are large scale] – Pr...
Thank Youwww.sdpi.org, www.sdpi.tv vaqar@sdpi.org 19
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Political Economy of Energy Reforms

Political Economy of Energy Sector Reforms in Pakistan
Published on: Mar 4, 2016
Published in: Education      
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Transcripts - Political Economy of Energy Reforms

  • 1. Political Economy of Energy Sector Reforms in Pakistan Dr. Vaqar Ahmed Sustainable Development Policy Institute 20th December 2012 1
  • 2. Outline• Situation Analysis• Energy Governance• Solutions Available• Implementation 2
  • 3. Situation Analysis• Primary energy consumption has grown by almost 80 percent• Energy mix skewed in favor of depleting gas and imported oil• Pressures on gas sector • Growing demand by residential, commercial, industrial, transport and power sectors • Low and government controlled gas prices • Indigenous natural gas reserves declining• Under business as usual scenario energy import requirements may grow by present 30 percent to 75 percent by 2025.• Pressures on government controlled power sector • Unrealistic power tariff • High inefficiencies • Low payment recovery • Untargeted subsidies (in turn resulting in circular debt) 3
  • 4. Cost of Not Taking ACTION• Impact of Energy Crisis on Pakistan’s: – Economy: Additional USD 35 billion investment needed to meet next 5 year’s demand – Politics: Tug of war between Supreme Court – Regulators and Government – Society/Employment: 1.4 million jobs lost – Exports: Average forgone exports since 2008 = USD 2.3 billion annually – Capital flight to Malaysia, UAE, Bangladesh, Jordon (and now India) 4
  • 5. Cost of Not Taking ACTION (cont..)• Energy management and national integration – Tensions between Islamabad and Balochistan (Royalty and gas pricing issue) – Tensions between Islamabad and Sindh (tariff on Thar Coal and sharing of generation-transmission revenues) – Tensions between Islamabad and Punjab (stoppages of gas to textile, fertilizer, cement industries/Energy riots) 5
  • 6. Three Broad Reform Areas 6
  • 7. I. Energy Governance• Independence of boards• Induction of professional management• Strengthening of regulatory bodies oversight• Appropriate legislative changes to allow deregulation • Case of Punjab Government 7
  • 8. II. Energy Pricing• Phase out subsidies • Hidden Subsidies • Cross Subsidies • Targeted Subsidies• Rationale for pricing • Producer pricing • Consumer pricing• Economic basis for all sectoral pricing• Full cost recovery of service provided 8
  • 9. III. Government’s Role in Energy Sector Limiting Government should Government must Government’s role to provide level playing take lead in policy and planning field conclusive discourse Integrated energy Regulator to oversee policy….and ensure its Issue of large dams implementation National Energy Investment and Conference focused Thar Coal (and management to be by on short term procedural hickups) private sector solutions Energy trade with neighbors Learning from Indian example • Power sector (India) • Gas Pipelines 9 (TAPI, Iran, Qatar etc.)
  • 10. Sequencing of Solutions Short Term Medium Term Long Term• Curtail power sector • Integrated Energy Plan • Multi-buyer Multi- losses • Implementation of seller private sector • Costs of nonpayment energy efficiency energy market of bills standards • Insulating gas sector • Power sector theft • Gas sector linkages from security threats • Transmission losses with neighbors • Incentivize oil• Allowing provincial exploration (removal government to take of subsidies on other autonomous decisions sources) • Develop national consensus on hydro and coal sources (e.g. dams and Thar coal) • Vision and capacity for renewables 10
  • 11. What about External Solutions? 11
  • 12. While TAPI and other Central Asian prospects will be driven by geo-politics, are there any medium term solutions? 12
  • 13. Trade in EnergyRegional Prospects (e.g. SAARC) 13
  • 14. Trade in Energy (SAARC) EfficientPetroleum Infrastructure energy products development markets Trade in Decentra power lized electricit y solutions 14
  • 15. Synchronizing National Policies• Joint techno-economic evaluation of opportunities and determination of pre-requisites• Establish financially sustainable energy entities, promote competition and ensure cost-reflective pricing of energy goods and services• Develop project-specific legal/institutional arrangements• Seek advice and support from multilateral institutions particularly in drawing experiences from Southern Africa Power Pool, Nordel/Nord Pool and electricity trade in Europe 15
  • 16. India – Pakistan Power Trade• Transmission lines through Wagah-Attari border• Surplus pockets in Indian Punjab (and downwards) 16
  • 17. Implementation !! Who will do it? 17
  • 18. Implementation• Issue of rent-seeking – Rental power plants debacle – Who steels power? [98.5% are large scale] – Pricing and need for microeconomist• Reforming service structure in energy entities – Who runs the ministry? [turnover rate of federal secretary]• Enforcing results based management with KPIs• Lack of demand-side accountability – Stronger consumer bodies needed – Who are the regulators? [need for regulatory assessment] – Punjab blocks GT Road for its supplies – SDPI’s report on Karachi Electric Supply Corporation 18
  • 19. Thank Youwww.sdpi.org, www.sdpi.tv vaqar@sdpi.org 19