Energy Crisis in Pakistan

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Energy sector of Pakistan
According to a forecast by Pakistan’s Private Power & Infrastructure Board, the power supply and demand gap will grow to over three times its current size by 2020 As illustrated in Chart 1, the following are key players in the energy sector: (i)Suppliers of primary energy: These include (a) oil/gas exploration companies (e.g., OGDCL and PPL), (b) oil refineries (e.g., ARL, Parco), and (c) distribution companies in gas (e.g., SNGPL, SSGC) and oil (e.g., PSO, Shell). All companies in this segment are involved in the supply of primary energy to power generation companies. (ii)Power generation and distribution companies: These comprise the Karachi Electric Supply Company (KESC) (a vertically integrated company), Independent Power Producers (IPPs) (e.g., Hub Power Company and Kot Addu Power Company), captive power producers, rental power producers, WAPDA Hydel, and the Pakistan Electric Power Company (PEPCO). PEPCO is the core entity in the energy sector. It is an umbrella institution managing power generation companies (GENCOs), the National Transmission and Despatch Company (NTDC), and power distribution companies. (DISCOs).1 Approximately 90 percent of the power generation in the country falls under PEPCO’s area of influence. Power consumers: These include individuals, industries, and the government sector as a user. It may be noted that tariffs paid by power consumers (often subsidized by the government) are used to make payments at various stages of the energy supply chain (i.e., power generation and distribution companies and suppliers of primary energy). The circular debt in the energy sector is closely related to cash flow problems in PEPCO. and manages the financial flows of all entities under its control,2 any problem in PEPCO cash flows is transmitted to other segments of the energy supply chain. As shown in Table-1, PEPCO collects tariffs from its customers for the supply of electricity (and tariff subsidies from the...
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