Report: Pakistan’s Energy; Growth in Crisis

Unplanned power outages lasting up to 10 hours are affecting businesses and the general population in Pakistan, slowing the country’s stuttering economy even further and mounting pressure on the government to address the issue.

Residents in the capital Islamabad are well used to surviving without heating in the winter, as the gas supply is cut off on a regular basis. Even when there is gas, the pressure is often so weak that it is impossible to cook, nevermind heat a home.

Service stations selling natural gas, which is the most popular fuel for motor vehicles in Pakistan, are only open a few days a week due to supply shortages.

Electricity also goes off for hours at a time. The shortages are expected to increase in spring, when temperatures begin to rise and air-conditioning becomes in demand.

Pakistan has plenty of problems, including terrorism, rows with its ally Washington, corruption and an unstable government. But it is the ongoing economic crisis, which is exacerbated by the energy problems, that is the most pressing issue for Pakistanis.

The electricity and gas shortages have been foreseeable for a long time, but Prime Minister Yusuf Raza Gilani’s Pakistan People’s Party (PPP) failed to take effective action to prevent the problem from escalating out of control.

Instead, the PPP followed the previous government’s policy of promoting the increased usage of natural gas even though the gas flow rate has dropped slightly in recent years.

A gas pipeline from Iran, which is potentially capable of plugging the supply gap, has been completed on the Iranian side of the border, but not on the Pakistani side.

Pakistan’s power stations have a combined capacity of about 20,000 megawatts, which should be enough to cover the country’s electricity needs.

However, the companies managing power stations are unable to run them at full capacity because of a financial deficit caused by public sector users who have not paid their bills in years.

Shaban Khalid, director of Ittehad Steel Industries and chairman of the Islamabad-based Young Entrepreneurs Forum, accuses the government of mismanagement and poor planning.

‘The crisis is a huge hindrance to us,’ said the 33-year-old, whose company is one of the largest private steel makers in Pakistan.

Recently, the gas supply at the Ittehad factory in Islamabad – a supply which is used for smelting steel blocks – was cut off without a warning. The outage is expected to last for at least a month.

Khalid and his collaborators were fortunate in that the company had already been experimenting with replacing gas with coal, making it possible for production to continue. However, the use of coal carries greater health risks for Ittehad’s employees, and costs more than gas.

Many other factories in the area have not been so lucky and have been forced to close their doors and lay off workers due to the energy crisis.

The Ittehad factory is only producing at 65 per cent of its capacity, according to Khalid. It employs around 400 staff, down from 550 in more prosperous times.

In the financial year to June 2011, the family-run business registered a contraction in growth of 16 per cent. No prospect of improvement is in sight, as Pakistan’s economy continues to deteriorate.

‘It’s going to be even worse this year,’ said Khalid.

‘The biggest problems are energy supply and corruption, which are affecting the economy and the entire country,’ the businessman said.

Report by Can Merey.