Opinion
Mint Explainer: Pakistan's power crisis has echoes elsewhere
Summary
- Bangladesh and Sri Lanka struggling as well; India can't afford to be complacent either
The recent blackout across Pakistan is a reminder of the enormous energy crisis confronting Islamabad. Pakistan, which is on the edge of bankruptcy, must focus on energy conservation and urgent power sector reforms. But an energy crisis doesn’t confront Pakistan alone. It afflicts other South Asian nations including Bangladesh and Sri Lanka, damaging their economic prospects. A fast-growing India too can’t afford to be complacent, as the acute power shortage in April last year demonstrated, more so as it competes with coal and natural-gas rich Asean countries like Vietnam and Indonesia to gain from China’s decline and emerge as a manufacturing hub. India is likely to witness the world’s biggest rise in energy demand this decade, says the International Energy Agency.
A massive energy crisis in Pakistan
Pakistan energy minister Khurram Dastgir has asserted that the blackout was not a major crisis, but a consequence of the economic strife. On 23 January, authorities began the load shedding at night in the winter months to conserve fuel. When engineers rebooted the system, voltage fluctuations tripped the power grid stations, causing an almost 15-hour outage. The cascading blackout impacted large parts of the cash-strapped country of 220 million, from capital Islamabad to its economic nerve centre Karachi.
The need for power sector reforms
The country imports costly oil and natural gas to generate most of its power, but is running precariously low on forex reserves, and must conserve energy. Steep fuel costs and hefty transmission and distribution (T&D) losses have led to load shedding. Half-hearted power sector reforms have not yielded results so far. While generation capacity has been beefed up in recent years, T&D losses have been substantial because of poor infrastructure, power theft and unpaid bills.
Indeed, its energy crisis over the decades has crippled its domestic industry. The textile industry is its lifeline and accounts for 60% of its exports, but Pakistan Readymade Garments Manufacturers and Exporters Association has warned of a 20% decline in exports if the power crisis persists.
Energy crisis in Bangladesh and Sri Lanka too
Acute power shortages pose a massive challenge for Bangladesh as well, a country that appeared to be on the cusp of an economic boom. The biggest victim is the country's ready-made garments industry, which accounts for over 80% of its exports.
Soaring oil and gas prices have forced Bangladesh to shut some of its diesel power plants and run many at half capacity, leading to power shortages. Apparel exports contracted towards the end of 2022, as load shedding took its toll. The Asian Development Bank has revised its growth forecasts for Bangladesh in fiscal 2023, from 7.1% to 6.6%. And falling exports will erode its forex reserves, making it difficult to afford costly fuels.
Meanwhile, a bankrupt Sri Lanka is unable to afford costly energy imports as the country faces its worst economic crisis in decades.
India can’t be complacent
In April 2022 when India reopened after lockdowns, a spike in power demand amid a heat wave shrank coal stocks at power plants, unleashing a crisis. With coal supplies to power plants rationed, energy-intensive factories pulled power from the grid, aggravating the power shortage.
The crisis showed that India must be ready with a war plan to meet the expected surge in power demand in the coming years. The International Energy Agency believes India will witness the world’s biggest jump in energy demand this decade.
India will be competing with coal and natural-gas rich Asean to emerge as a manufacturing hub, hoping to gain from the erosion of China as the world’s factory. Vietnam is coal-rich, though its fast-growing economy has forced it to import coal as well. Indonesia has abundant natural gas while Malaysia has plenty of oil. And Asean countries have aggressive renewable plans as well. Vietnam, in particular, is building solar capacities aggressively.
India too is transforming its power sector and diversifying its energy mix. Coal’s share in electricity generation is expected to decline from 75% to 55% by 2030, with renewables accounting for 35%. And it is pursuing next-gen power sector reforms, particularly in distribution through the Electricity Amendment Bill 2022.
