Energy crisis responsible for low economic growth

Staff Report

ISLAMABAD: Critical situation in Pakistan’s energy sector has become a primary constraint on the country’s economic development.
At a seminar on Pakistan Energy Sector: From Crisis to Crisis-Breaking the Chain orgainsed by Pakistan Institute of Development Economics (PIDE) Ziad Alahdad visiting senior Fellow PIDE and formerly Director of Operations World Bank said the recent D8 Summit validated the importance of the energy sector by concluding energy security be accorded the highest priority.
He emphasised the state of the energy sector (and by extension) the economy was not at all beyond redemption. If we believe that in every crisis there is opportunity, Pakistan, with its many crises should have many opportunities.
He attributed the prevailing condition to lost opportunities, prohibitive delays, implementation performance and reform reversals.
He recognised Pakistan’s policy makers have been remarkably adept in articulating the overall objectives for energy policy within a national development context.
The problem is not what the objectives are but how they can be achieved, he said.
He introduced the concept of Integrated Energy Planning and Policy Formulation (IEP) and the institutional structure. Without this decision-making in the sector remains inherently flawed and policy initiatives are reduced to shooting in the dark. Rather than offering prescriptive solutions, he advocated building Pakistan’s own capacity to facilitate sound policy decisions.
IEP mechanism, tried and tested in developed and developing countries alike is not new to Pakistan where it was introduced in the early 1980s.
However, over time with declining institutions and erosion of human capacity, the fledging efforts were abandoned. This was partly because IEP lost favour with international institutions on the presumption that market forces would lead to the right policy choices.
What is now in place is a largely ad-hoc process which responds to crisis situations instead of averting crises through a long-term vision.
The key element in IEP perhaps the most difficult and therefore requiring strong political will is the restructuring of policy institutions to reverse the unchecked fragmentation that has occurred over the years, in other words to consolidate policy institutions into a single ministry of energy.
He demonstrated how IEP could address the serious issues confronting the sector including the growing deficit, the low utilisation of existing resources, developing the optimum energy mix, circular debt, subsidies,and most importantly alleviating the burden of the poor through pro-poor energy policies.
He emphasised the skills necessary for re-invigorating IEP were available locally and could be deployed rapidly.
Dr Shahid Sattar, member (Energy) of the Planning Commission highlighted exorbitant level of energy subsidies (Rs 1.4 trillion) with little to show in terms of results, the lack of policy papers in the energy sector and the importance of an appropriate pricing policy, which gives the right incentives and helps develop the sector and expand services.
We all know about the problems, what we need is solutions and policy papers to guide the government and policy makers.
Dr Sattar expressed his strong agreement with the need to implement integrated energy policy. He agreed the fragmentation of policy-level institutions were a major impediment.
Dr Rashid Amjad, Vice Chancellor PIDE gave concrete examples where lack of integration had stymied development.
In particular lack of coordination between the Planning Commission and the Finance Division had adversely affected efforts to the jump-start the economy.
He said the too many actors at the policy level, lack of political will and issues of pricing and subsidies remained paramount.

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