The long hours of power outages that we are seeing now even in major urban centers of the country — the Energy Crisis — have been long in the making. Most Pakistanis feel that the shortage of electricity in Pakistan mostly ended somewhere during the 2015–20 period, and that this latest round of load shedding is simply due to the mismanagement/bad governance of this new Sharif Administration. That is not exactly true.
The story starts way before 2022, from the bad policy-making in the power sector since the 80s and the 90s. But the problem first intensified during the late 2000s. This is because during the Musharraf years, Pakistan saw substantial growth. Pakistan’s economy grew at an average of 6%, poverty rate fell below 10%, and the middle class grew (up to a third of the population by some estimates) along with the services sector.
With the growth of this middle class and the services sector came appliances such as TVs, Computers and Air Conditioners etc. that shot up the demand of electricity in the country. But the generation and distribution capacities of Pakistan’s power sector remained almost stagnant by comparison. Fast forward to the 2012–13 elections, and Nawaz Sharif formed the government over promises of reforming the power sector of the country.
And did bring some reforms. These reforms, however, could have been much better managed. Nawaz Sharif allowed foreign investors to set up small generation plants in the country, and the government was obligated to buy all of the generated electricity, regardless of the ongoing demand. Most of the plants set up under this scheme were fuel-based, which meant that not only did the government need to import expensive fuel to run such plants (fuel that now costs a lot of dollars, and dollars that now cost a lot of rupees), it also had to buy that electricity from those foreign investors in dollars. This resulted in what is known as the power sector circular debt (which today is well over a trillion rupees).
It seems as if the Nawaz administration didn’t think through the potential long-term consequences of this power-sector investment scheme, nor did they even bring the distribution part of the power sector (which causes heavy line losses along with sub-optimal collection of bills/electricity theft). This entire formula was a recipe for disaster, the disaster that we are seeing today.
The Imran Khan administration, after 2018, did practically nothing to address these structural faults in the power sector, and only kept the expensive fuel-based power plants running to give an uninterrupted supply of electricity to big urban areas which created an illusion that the problem is ending. Its not.
Today when the price of petrol is increasing internationally, and the value of the rupee is falling, it is becoming impossible for the government to run those expensive fuel-based generation plants running in the face of depleting dollar reserves and IMF’s austerity conditions. This power crisis that we are seeing today, has been long in the making. And its not going away so soon.