Who's paying Pakistan's electricity bill?

Pakistan's Interior Minister Rehman Malik always seems to be in the news for his outrageous statements, ranging from terrorists dressed like Star Wars' characters to attributing sectarian violence to men trying to get rid of wives and girlfriends. Another headline was added to the mix on Monday - Pakistan daily Dawn reported that Malik had not paid his electricity bills for more than 56 months, or a little less than five years.

In a country where parliamentarians are notorious for not paying taxes and Rehman Malik's popularity is almost non-existent, this news will hardly raise any eyebrows.

Except for the harsh reality: Pakistan is facing a crippling energy crisis that will not be resolved overnight and is hardly helped by news of Malik's non-payments.

As summer approaches and the mercury creeps up, demand for electricity will skyrocket. Consumers will run fans and air-conditioners (provided they have electricity) for longer durations in the summer, and Pakistan's electricity output is nowhere close to meeting these needs. There appears to be no imminent solution to the nightmare that is Pakistan's energy sector.

Pakistan's energy crisis has caused it to lose up to two percent of its GDP since at least 2010. While organizations such as the Asian Development Bank and USAID have helped (USAID says it has spent $156.5 million since 2009 on assistance projects in the energy sector), funding projects aimed at adding megawatts to the grid, improving line losses, and initiating small-scale dam projects, assistance alone is not a long-term solution.

And then there is the circular debt issue. Essentially, the Pakistani government provides electricity subsidies to users, but is unable to pay off the subsidies' cost difference to electricity providers, who, in turn, are running low on the cash reserves necessary to pay Independent Power Producers (IPPs) and fuel suppliers. The government pays a certain portion of this debt owed by state-owned power companies to private power producers and Pakistan State Oil, but it is still not enough to cover the losses. The debt has now crossed the Rs.800 billion mark. Gas and power shutoffs, from both scheduled and unscheduled loadshedding, continue on a daily basis, and the government's failure to implement financial reforms has the IMF issuing tense reports on the country's economic situation. A recent audit report of a USAID project for the Jamshoro Thermal Power Plant's repair states that the project will be unsustainable if the Government of Pakistan does not implement reforms.

The problems that Pakistan faces seem insurmountable: many consumers, like the country's interior minister, local and provincial government offices, intelligence agencies -- the list goes on -- don't pay electricity bills. Others resort to illegal connections to steal electricity, causing a massive loss to power companies. And according to a report in the Express Tribune in December 2012, the current government has "doled out PKR 1.4 trillion in power subsidies" over its five-year tenure, an issue multilateral development organizations like the Asian Development Bank have critiqued in the past.

Pakistan has tried to take measures to resolve the crisis, but most of these efforts have come to nought. The much-touted Rental Power Plants scheme advocated by then-Federal Minister for Water and Power and now-Prime Minister Raja Pervez Ashraf were mired in corruption. Construction of small-scale hydropower projects is underway, but these are not going to make Pakistan electricity-sufficient. Pakistan is now going forward with a gas pipeline deal with Iranto meet its energy needs, but that has come under fire from the U.S., raising fears that Pakistan may be hit with sanctions if it goes ahead.

In 2012, Pakistan's electricity shortfall shot up to over 8000 MW, resulting in crippling electricity blackouts of 12-16 hours. Industries have suffered tremendously as the crisis has worsened, and consumers have staged protests throughout the country, demanding action from the government. This month, Pakistan State Oil was slapped with a fine for defaulting on its payments to international suppliers. And on Feb. 24 this year, there was a nationwide power breakdown -- a 180 million people or so were affected.

With general elections in Pakistan just a couple of months away, there doesn't appear to be the appetite or the political will for reforms in the country. And as it is, it is too late to implement reforms, since a caretaker government will be installed once the parliament finishes its term in the coming weeks. As campaigning for votes begins, politicians will offer quick-fix solutions and promises that they say will be fulfilled once their party is elected. However, Pakistan's energy sector requires solutions in the short and long-term, financial resources and the courage to implement reforms.

The IMF, ADB, and a bevy of experts have advised the Pakistani government ad infinitum on potential solutions, including the end of subsidies on electricity, raising tariffs, and recovering outstanding payments from consumers like Mr. Malik and the intelligence agencies. Addressing the energy crisis will require Pakistan's next government to move toward using coal in power plants, and away from using furnace oil, which is expensive and has contributed to Pakistan's circular debt problems. Instead of trying to convince donors to fund large-scale projects, the new government could also focus on building more small-scale power plants that could contribute to diminishing the shortfall, even if it's just a tiny drop in the ocean. Reforms should also include a more concerted effort towards domestic conservation of electricity (if I had a penny for the number of times I've seen air-conditioners running non-stop in ministers' houses...) and an effective load management system, before Pakistan plunges into the darkness again.