Crisis talks as power shortages hit Pakistan industry

ISLAMABAD, April 22 Thu Apr 22, 2010 8:25am BST

ISLAMABAD, April 22 (Reuters) - Pakistan is expected on Thursday to introduce a raft of measures to conserve energy as the government struggles with a chronic electricity shortage, which is inflaming public anger and stifling industry.

Government and energy officials have been meeting this week to find ways to overcome the shortage and Prime Minister Yusuf Raza Gilani will announce their decisions later on Thursday.

"We will have to take short-term, medium-term and long-term measures," Shahbaz Sharif, chief minister of Pakistan's biggest province, Punjab, told business people after the end of the crisis talks on Wednesday.

"In the short-term, we have to see how to save energy," he said.

Pakistan has production capacity of about 16,500 MW but faces a shortfall of between 4,000-5,000 MW.

The main reason for the shortage is that past governments failed to anticipate growth in demand and delayed implementing power and dam projects that would have boosted output.

A lack of investment in existing plants, outdated grids and rampant electricity theft mean that some grid companies experience line losses of 30-40 percent, analysts say.

Lengthy power outages, known as load-shedding, can last 6-8 hours a day in cities, while cuts can be much more frequent in rural areas.

The cuts often trigger protests by angry, stick-yielding men who block main roads, burn tyres and throw stones at police.

The crisis has crippled industry, notably textiles, the main export sector and largest employer in the manufacturing sector. The International Monetary Fund (IMF) has cited the power shortage as a serious economic constraint.

"Electricity shortages continue to prevent the economy from achieving its potential," the IMF said this month.

An IMF emergency loan package of $7.6 billion agreed in November 2008 helped avert a balance of payments crisis and shore up reserves. The IMF increased the loan to $11.3 billion in July.

INDUSTRY AND AGRICULTURE

The IMF is urging the government to remove all subsidies on electricity, which will lead to higher prices for consumers.

Authorities have already raised electricity charges significantly and the News newspaper said consumers would have to pay a 5.5 percent surcharge on every unit they use in the new fiscal year, beginning on July 1.

Other measures Gilani is expected to announce include two full days off a week for government workers, the early closure of markets and restrictions on electronic billboards and on air-conditioning in government offices, media reported.

Restrictions could also be put on wedding parties held in establishments that organise receptions to ensure they do not go on for too long at night, media said.

Sharif, the brother of opposition leader and former prime minister Nawaz Sharif, said he had initially opposed the idea of two days off a week for government workers, who now get one.

"I was initially a strong opponent of that ... but in this emergency-like situation, we will have to seek a way to save energy for our industry and agriculture sector," he said.

The government has vowed to increase supplies but needs money to do so. The United States and Pakistan last month outlined steps to refurbish power stations, part of a $125 million U.S. aid pledge for the sector.

Last year, the government initiated plans for the installation of rental power plants, which it saw as the "only solution", while completing medium- and long-term projects.

However, accusations of misconduct and a lack of transparency have swirled around the rental projects. (Writing by Robert Birsel; Editing by Chris Allbritton)

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