COULD PAKISTAN’S ENERGY CRISIS BRING DOWN THE GOVERNMENT?

Michael Kugelman

February 10, 2015

Sometime around midnight on January 25, separatist fighters in the insurgency-riven Pakistani province of Baluchistan attacked a power transmission line.

They probably didn’t anticipate the immense ripple effects this single strike would have across the country.

The assault, which blew up two key towers near a major power station, tripped the national grid. Eighty percent of the country—including most major cities—plunged into darkness. Many in Pakistan described the outage as the worst in the nation’s history. In some cities, hours went by before power was restored.

This wasn’t the first time militants attacked Pakistan’s electricity infrastructure. Baluch separatists targeted more than 100 gas lines over the last four years, including a February 1 assault that reduced gas supplies to Punjab and Khyber-Pakthunkhwa provinces by 25 million cubic feet. In April 2013, the Pakistani Taliban blew up the largest power station in Khyber-Pakhtunkhwa province. Half of Peshawar, the provincial capital with a population nearly as large as that of Los Angeles, lost power.

The fact that one isolated attack can inflict such widespread damage underscores the severity of Pakistan’s national energy crisis. Even in an era of cheap oil, Pakistan is experiencing a power shortfall of roughly 5,000 megawatts (in recent years, energy deficits have soared to 8,500 megawatts—more than 40 percent of national demand). In parts of rural Pakistan, residents are lucky to have four hours of electricity a day. The crisis’s economic costs are stark; shortages have cost the country 4 percent of gross domestic product. Some Western companies, citing electricity deficits, are suspending operations in Pakistan. On January 26, the Moody’s ratings group warned that energy shortages will damage Pakistan’s credit worthiness.

More of a Menace Than Militancy

In Pakistan, energy is arguably a bigger public policy challenge than militancy because it directly affects so many more people. Shortages prevent people from cooking, working (hundreds of factory closures—including 500 in the industrial hub of Faisalabad—have left scores unemployed), and receiving proper medical care (in some hospitals,services have been curtailed). Not surprisingly, public opinion polls in Pakistan identify electricity shortages as one of the country’s top problems. Pakistani officials are not exaggerating when they claim that energy woes are a “bigger menace…to our existence” than the war on terror. Pakistan’s energy insecurity is deeply destabilizing—and not just because militants prey on fragile infrastructure. Streets often swell with angry protestors railing against power outages. They have blocked roads, and attacked the homes and offices of members of Pakistan’s major political parties.

No Quick Fixes

The causes of Pakistan’s energy crisis go well beyond supply shortages. They are rooted in chronic, structural problems such as widespread inefficiencies (including transmission and distribution losses approaching 30 percent) and sectoral debt approaching $3 billion. The losses occur for a variety of reasons. These include bad equipment, inadequate maintenance, theft (when people hook or cut electricity wires), and attacks on transmission lines. The debt is a consequence of huge cash flow problems: energy generators, distributors, and transmitters all lack funds. Compounding the problem is that the government charges a pittance for energy and few customers pay their bills. As a result, the sector can literally not afford to provide energy. Another core problem is policy incoherence. In the absence of an overarching energy ministry, multiple government entities jockey for control over policy, resulting in a dysfunctional policymaking process.

Pakistan’s government has long focused on increasing generation capacity and ramping up supply. Given the deep, structural nature of the problem, however, there are no quick fixes. Islamabad’s latest plan is to tap into unexploited coal reserves in the desert region of Thar. This plan does little to address the crisis’s underlying causes, and it ignores the fact that Pakistan lacks both the technical capacity and funds to undertake such large-scale exploitation—not to mention the advanced infrastructure required to transport this coal around the country. Neither do modest cash infusions from external donors address the roots of the energy crisis (last year, Saudi Arabia gifted Islamabad a $1.5 billion loan to fund new energy projects). And nor do much-mocked government conservation measuresthat ban neon signs and all-night wedding parties. More promising initiatives, such as efforts to bring cheaper renewables into the energy mix on a larger scale, are years from completion.

A Weakened Government

Pakistan’s 2013 elections swept Nawaz Sharif into power in a landslide. Blessed with a huge mandate from the masses, he was (according to his supporters) determined to learn from the past—when spats with Pakistan’s powerful military got him booted from power during two previous terms as prime minister—and to rule responsibly and effectively.

Unfortunately for Sharif, things haven’t worked out as planned. Bruising battles with the military over militancy, India, and the legal fate of former military leader Pervez Musharraf, coupled with anti-government protests last year, have weakened Sharif tremendously. Today’s government is a brittle shell of its former self. The armed forces have effectively taken full control of the foreign affairs and defense portfolios, and instituted new military courts to prosecute terrorists. To be sure, the Pakistani military has always held a veto on issues of foreign affairs and defense, and wielded immense clout over these portfolios. Yet for the first year of his current term, Sharif—as he did during previous terms as premier—sought to exert more civilian control over these areas, and may have enjoyed some limited success. Sharif, however, has now been cut down to size, and the civil-military power balance has reverted to the status quo ante.

Consequently, civilian officials have once again been reduced to parroting the line of the security establishment—and in recent months, they have been doing so incessantly and vociferously. Consider how Islamabad has been calling for international intervention to resolve the Kashmir dispute—Sharif himself made such an appeal in a UN General Assembly address last fall. Or how it has been loudly accusing India of undertaking “subversive” activities in Pakistan. Or how Sartaj Aziz, the prime minister’s chief foreign affairs advisor, recently warned that a U.S.-India civil nuclear deal—which has yet to be implemented—could destabilize South Asia. According to some whisperings in Pakistan, Aziz is the military’s new de facto spokesman).

As with previous prime ministers, Sharif’s policy space is now fully restricted to domestic affairs, including energy policy. Energy was a priority issue during Sharif’s electoral campaign (energy took up more pages than any other issue in his political party’s election manifesto), and he was elected with a large mandate to resolve the crisis. Unfortunately, he has little to show for it. Sharif’s government has said the right things—pledging lower energy subsidies and higher tax revenue in order to bring relief to a debt-ridden energy sector—but little of substance has come from these promises. One bright spot has been renewables; last month, the government announced measures to facilitate the use of solar power on a greater scale. These include the approval of grid-connected solar energy and the elimination of high taxes imposed on imported solar equipment. Still, such efforts, while encouraging, will not resolve the energy crisis.

In effect, Sharif is simply in no position to resolve the energy crisis, absent major policy shifts that he lacks the clout to carry out. Even the most popular and powerful Pakistani civilian leader would struggle to muster the political will needed to implement tough but necessary energy policy correctives—from pricing reforms and crackdowns on theft to sectoral restructuring and expansions of the tax base. The enfeebled Sharif has practically no chance.

Sharif Backed into a Corner

In the coming months, Sharif could find himself being backed into an even smaller corner. As Pakistan’s scorching summer heat arrives and continued outages keep people from cooling down, tempers could flare and touch off intense street protests. Imran Khan, the cricket-star-turned-populist politician with close connections to the security establishment, could exploit such public anger and (perhaps following a nod from the Pakistani deep state) mobilize large-scale protests against energy shortages—while renewing calls for Sharif’s resignation that he was issuing last summer.

Meanwhile, the Pakistani military might sense an opportunity to pounce. It is eager to minimize public unrest amid a stepped-up counterterrorism campaign announced after the Pakistani Taliban’s December assault on an army-run school in Peshawar. In Pakistan, where the military has held power for about half the country’s history, coups are always a possibility. Today, however, an outright putsch is unlikely. The military already wields ample power behind the scenes, and likely doesn’t want to be directly saddled with Pakistan’s overwhelming challenges. Tellingly, last summer, when anti-government demonstrations briefly became violent, and stone-throwing protestors converged on Parliament, the army refused to intervene directly. Some Pakistani commentators believe Pakistan’s new army chief, Raheel Sharif, is simply not interested in a takeover. (This does not rule out the possibility, however, that the military might intervene—even if just briefly—should energy protests turn very violent, expand, and last for a long time.)

A more likely possibility is that the army—concluding that Nawaz Sharif lacks the credibility to manage, much less resolve, one of the country’s most far-reaching and destabilizing challenges—pressures the premier to call early elections (his term ends in 2018). If the prime minister’s body language in recent weeks—which signaled fatigue and discomfort—is any indication, then he might well oblige. However, if his defiant side resurfaces he may reject early elections. This side was on full display during the anti-government campaign last summer, when he repeatedly refused Khan’s demands.

In a country as volatile as Pakistan, standoffs between civilians and the armed forces are nothing to sneeze at. And judging by Pakistan’s history, they rarely end well for the civilians.

Pakistan’s government, much like its general population, caught in the crosshairs of an energy crisis that Islamabad cannot control, could be in for some dark days.

Michael Kugelman is the senior associate for South Asia at the Woodrow Wilson International Center for Scholars in Washington, DC. He can be reached at michael.kugelman@wilsoncenter.org and on Twitter@michaelkugelman.