Visiting US special envoy to Pakistan and Afghanistan Richard Holbrooke has met oil, water and power and finance ministers to discuss Pakistan's power and energy problems. But, whether the United States can give more than just helpful advice to resolve, what are Pakistan's mostly self-made problems remains to be seen. According to the analysts, Pakistan has roughly 20,000MW of installed power production capacity, but that falls short of demand by some 3,000-3,500 MW. Outdated power grids and rampant electricity theft mean that some grid companies experience line losses of up to 30-40 percent. Many independent power producers (IPPs), owed money by grid companies and unable to reliably pay their fuel bills, are forced to operate well below capacity, exacerbating the electricity shortfall and leading to longer brownouts, dubbed load-shedding. A poll conducted recently by Gallup Pakistan found that 53 percent of people face power cuts of over eight hours a day. Many small and medium sized firms lose several hours a day because of the power cuts, while bigger companies often install their own generators, driving up costs. Pakistan failed to approve enough proposed power projects during the economic recovery and boom in 2002-2007. The government, like many others in the region, has long subsidized end-user power tariffs to ease the burden on households, but as the global slowdown hit government revenue, it started to fall behind on those payments. That, together with widespread default on power bills by customers, has created a huge problem of “circular debt” in the power sector, whereby grid companies are unable to pay power companies, who in turn have trouble paying refineries for fuel. The government recently reached an agreement with the World Bank and Asian Development Bank on phasing in increases in power tariffs. The multilateral lenders are pressing the government to do away with subsidies as part of an International Monetary Fund bailout program. That issue is sensitive for the government, because it risks an outcry from the public for raising tariffs. The government has planned for about 4,100 MW of new capacity to come online by the end of 2010, much of it from oil-burning plants but some from gas-burning plants. Visiting Islamabad in March 2006 to discuss Pakistan's energy needs, then U.S. energy secretary Samuel W. Boden listed everything from coal, and gas pipelines - except from Iran - to renewable sources such as cellulose based ethanol and wind and solar power. US cooperation in civil nuclear power was not on the list, largely because of concerns over Pakistan's record on nuclear proliferation. According to consultancy FACTS Global Energy, in 2008, natural gas accounted for 48 percent of Pakistan's power output, followed by hydroelectric at 34 percent and fuel oil at 16 percent. The government would like to do more exploration to raise domestic gas production, but that will take time to come through. The country is sitting on a huge coal reserve in the Thar desert in southern Sindh province, but it is low quality lignite and will require massive infrastructure investment. Pakistan reached an agreement with Iran in May to import gas via a pipeline, expected to come online around 2014. Authorities also aim to eventually import 1 million-2 million tonnes of liquefied natural gas (LNG) from Qatar a year. But given the need to ramp up output in the short term, analysts say it is likely reliance on fuel oil will increase. Potential hydroelectric projects will take time and have been dogged by disputes between Pakistan's four fractious provinces. An unpredictable policy framework, largely due to the uncertainty over how long governments will last, has deterred international investment in the power sector.
