ISLAMABAD - Pakistan Institute of Development Economics (PIDE) has organised a launch of monograph entitled “Pakistan Energy Sector: From Crisis to Crisis-Breaking the Chain” authored by Ziad Alahdad, Visiting Senior Fellow, PIDE and formerly Director of Operations World Bank.

Dr Shahid Sattar, member (Energy) of the Planning Commission presided over the launch. In his address, Ziad Alahdad, stated that the critical situation in Pakistan’s energy sector has become a primary constraint on the country’s economic development. The recent D-8 Summit further validated the importance of the energy sector by concluding that energy security be accorded the highest priority.

He emphasised that the state of energy sector (and by extension) the economy is not at all beyond redemption. He stated, “If we believe that in every crisis there is opportunity, Pakistan, with its many crises, should have many opportunities.”

Despite a significant body of literature on issues and options in the sector, the deterioration continues, contributing to an ever-widening energy deficit. Alahdad attributed the prevailing condition to lost opportunities, prohibitive delays, implementation performance and reform reversals. The story of Pakistan’s energy sector is symptomatic of virtually all sectors of the economy.

He recognised that Pakistan’s policy makers have been remarkably adept in articulating the overall objectives for energy policy within a national development context. “The problem is not what the objectives are but how they can be achieved”, Ziad Alahdad said.

He further stated that overwhelming evidence from energy analysts points to the absence of coordinated policy formulation as a fundamental issue. He introduced the concept of Integrated Energy Planning and Policy Formulation (IEP) and the institutional structure which supports it. Without this, he maintained, decision-making in the sector remains inherently flawed, and policy initiatives are reduced to shooting in the dark. Rather than offering prescriptive solutions, he advocated building Pakistan’s own capacity to facilitate sound policy decisions.

He further stated that the IEP mechanism, tried and tested in developed and developing countries alike, is not new to Pakistan where it was introduced in the early 1980s.

However, over time, with declining institutions and erosion of human capacity, the fledging efforts were abandoned. This was partly because IEP lost favour with international institutions on the presumption that market forces would lead to the right policy choices. This premise did not hold for the special issues in Pakistan. As a result, what is now in place is a largely ad-hoc process which responds to crisis situations instead of averting crises through a long-term vision.

He added that the key element in IEP, perhaps the most difficult and therefore requiring strong political will, is the restructuring of policy institutions to reverse the unchecked fragmentation that has occurred over the years, in other words to consolidate policy institutions into a single ministry of energy. Policy makers are beginning to think along these lines but inherent in their deliberations is the potential spin-off of hydropower into another ministry, a move which would undermine the whole effort.

He demonstrated how IEP can address the serious issues confronting the sector including the growing deficit, the low utilisation of existing resources, developing the optimum energy mix, circular debt, subsidies and most importantly alleviating the burden of poor through pro-poor energy policies.

Ziad Alahdad, emphasised that the skills necessary for re-invigorating IEP are available locally and can be deployed rapidly. Combined with the consolidation of policy institutions, a strengthened policy environment can emerge, capable of addressing Pakistan’s special energy issues, thereby “breaking the chain of living from crisis to crises and paving the way to recovery in the energy sector and the economy as a whole”.

He further reiterated that with universal recognition of the crisis, the time to act is now.

In his opening remarks Dr Shahid Sattar, member (Energy) of the Planning Commission highlighted three key issues: exorbitant level of energy subsidies (R 1.4 trillion) with little to show in terms of results; the lack of policy papers in the energy sector; and the importance of an appropriate pricing policy which gives the right incentives and helps develop the sector and expand services.

He said, “We all know about the problems, what we need is solutions and policy papers to guide the government and policy makers.” 

In his concluding remarks, Dr Sattar expressed his strong agreement with the need to implement integrated energy policy. He agreed that the fragmentation of policy-level institutions were a major impediment.

Till the market economy is fully developed, which will take a long time, the need for IEP is unquestionable. He reiterated that the implementation performance and poor governance needed to be addressed urgently.

Dr Rashid Amjad, Vice Chancellor, PIDE, gave concrete examples where lack of integration had stymied development. In particular, lack of coordination between the Planning Commission and the Finance Division had adversely affected efforts to the jump-start the economy.

He cautioned that the integration of energy plans with economic objective remain weak. Export growth has not managed to offset the raising oil export bill.

He said that the too many actors at the policy level, lack of political will and issues of pricing and subsidies remained paramount. He therefore encouraged the rapid implementation of integrated energy planning.