Encouraging staggering FDI to build energy infrastructure requires deregulated markets with independent regulator(s) having teeth; one energy regulator (merged NEPRA and OGRA and plans of another one for E&P discarded), effective CCP, strong Arbitration Laws now having been drafted and non interfering judiciary that restricts itself to non commercial matters and allows corrective measures.
Investors undoubtedly need to follow OGRA standard and rules but its role is to be limited to enforcing them only.
The missing ingredient is investor and project finance, both an increasing challenge especially when Pakistan is running out of molecules and needs a booster in its energy infrastructure.
No participation in 600MWp project tender despite tariff revision to 5 cents/Kwh (3 cents in India) and even after leaving it open for bidders to quote
IGCEP 2024 base case scenario indicates 63.31 bn US$ NPV investment requirement both in terms of CAPEX and OPEX of electric power generation by the year 2034.
Our plans seek $165bn in oil and gas exploration, $ 54 bn for untapped 95 tcf shale, $22bn for 38 tcf offshore gas reserves, $30bn for 3.6bn barrels of crude oil, $20bn for 35-70 tcf for untapped tight gas and $38bn for 66 tcf untapped natural gas reserves.
We seek assistance of China to undertake feasibility to convert 3 imported coal plants (3,960 MW) to upto 20% local coal. Another 1,320MW Jamshoro power plant is funded by ADB and 660MW by Lucky Group. This would save $800m annually, reduce electricity prices by Rs3 per unit but requires about $480m investment to expand Thar coal mine to produce enough coal for these power plants.
Estimated investment of $ 1.4bn is required for coal to produce 0.66m mtpa of ammonium nitrate per tender floated by BHEL
And we continue to dream of undertaking coal gasification at Thar without understanding the investment required.
Industrial and Commercial Bank of China and Bank of China have linked their $600 million loan disbursement to settlement of outstanding payment of about Rs 550bn to the Chinese Independent Power Producers.
Yet we hope for $4-6bn investment in refinery upgrade from China
Similarly, is the $10-14bn refinery/petrochem project dream without evaluating and understanding ground reality and impact of $4.5bn refinery by Sinopec in Sri Lanka and $40 bn investment in the Gulf refining and petrochemicals industry (KIPC, Aramco, ADNOC, BAPCO, Duqm, Oman).
We thwarted ACWA initial interest in 2019 for a $2bn solar project in Baluchistan as part of plans to increase RE share to 30% by 2030 and are evolving a hydrogen policy!
NEOM, ACWA and Air Products achieved $8.4bn (EPC $6.4bn) financial close this year with a 30 year offtake agreement for all the green ammonia produced based on 600 t per day green hydrogen produced in 2026 by integration of 4 GW of wind and solar energy with challenges of intermittency and stability issues to be addressed.
And our intellectuals hope to produce hydrogen and increase EV vehicles this decade with no infrastructure evolving in the near future.
While India is invited to take stake in Ruwais LNG liquefaction terminal (2×4.8mmtpa) by ADNOC , we have yet to have a gas security investment strategy in liquefication facilities, there is loss of confidence of Sinosure, our net FDI is currently not even matching the $1.5-2bn over last 10 years with FX reserves unbelievably being projected at ~ $22bn in next 25 years (per some analysts), should have woken up the decision makers and populace.
It is thus necessary to address these issues promptly through effective solutions to ensure a sustainable and thriving energy ecosystem for all stakeholders involved
There comes a point where we need to stop pulling people out of the river. We need to go upstream and find out Why they are falling in. Desmond Tutu
Pakistan is slowly and gradually realizing that hopium is not a recipe for growth; structural changes and reforms are.
FY25 target of 3.6% is much better than contracted 0.2% in 2023 and 2.4% in 2024 but below our fertility rate of 2.55%.
Our economic turnaround moment instead necessitates a tax to GDP ratio of >15% (9.62 % currently, 11.5% in 2025 based on tax revenue of Rs 12,970bn and 2026 planning of 13%), accepting our decades of mismanagement and taking control of situation by undertaking aggressively the reform battle to achieving 7-9% GDP growth.
The requisite 3-5 year roadmap reflects intent, build credibility and confidence of the nation is reflective in the Rs 18,877bn budget with Rs 7,283bn deficit (5.9% of GDP).
We require $3bn new loans, undertake debt servicing of Rs 9,775 bn, transfer NFC award of Rs.7438 bn, Rs 1777 grants and transfers to Provinces
Yet Federal and provincial development funding is being proposed at over Rs 1700bn of which PSDP is Rs 1400bn (for ongoing schemes only?) when actual spend last year was barely Rs 400bn; MNA Projects Rs 75 bn and MPAs projects of Rs 300bn; Rs 100bn PPP while SOEs expense continues and NEC approves provincial development schemes of another Rs 2,000 bn.
Provinces should undertake their projects as part of their ADP by contracting directly with DFIs, generating resources through their revenue boards (agriculture, property, sales tax etc), excise and taxation departments including Worker Welfare Fund, electricity duty and route permits/vehicle fitness.
Rs 5 bn (33% under 3P) for Health Tower in Islamabad, Health insurance scheme for 5000 journalists and media workers by GOP and Rs 1bn health plan for journalists, Rs 2.05bn medical schemes for Islamabad and Rs 1bn grant to bar councils in these trying times could be avoided.
And instead, visible measures for reduction in tax breaks, estimated in 2023-24 at Rs 3.9tr would reflect willingness to change but additional taxes is a simpler option.
Old habits die hard.
Parliament needs to urgently mandate balancing of budget in the next decade, specify yearly targets for reduction in loans, interest payments, increase in tax to GDP ratio, reduction in expenditure, reduction in expenditure on SOEs (Rs 174bn from disinvestment of non strategic SOEs), contributory pension (21.69% of Rs 1,014bn is civilian pension) and doing away with IMF after the current program, as committed by PM.
But this requires urgent disruptive measures starting with transfer of responsibilities to Provinces, ensuring semi annual adjustment in gas prices, a home grown budget that targets reduction of interest payment and debt to provide space for improving our social indicators without blaming or hiding behind IMF diktat/harsh conditions.
Devolution had to happen yesterday and yet a 3rd committee is being formed to review report of recent committee that followed 2023 committee that had recommended upto Rs 1tr per year austerity program based on Rs 200bn in subsidies, Rs 200bn from development side, Rs 55 bn from running of civil government (Rs 839bn is proposed for running civil government), 15% from cut in non combat defence expenditure, Rs 70bn from single treasury account and Rs 100bn from conservation measures.
Provinces also need to consolidate and merge functions as part of a cost reduction drive.
PM promises results in 1QFY25 and within 75 days.
Will to tax the untaxed is reflected in budget but additional small measures would expedite better deliverance by registration number and NIC # being identifier for all FBR and others, with centralized database of NADRA accessible by approved institutions e.g FBR, Banks and Planning Commission.
Forcing documentation should be by allowing adjustment of tax paid by end user for certain services: doctors, lawyers, hospitals, restaurants, construction and medical/food retailers/distributors.
No transaction can be undertaken without either number.
But there is need to reflect narrative of will and reform driven decision making by breaking the status quo and should have started by taxing the perks of government employees and others across the board, as well.
Tax for all has to be applicable on total remuneration inclusive of all perks across the board (excluding retirement benefits), living wage should be Rs 60-65k pm vs Rs 37k proposed and especially after 20-25% (based on average inflation per FM) increase across Federal and eventually by Provincial Governments (it will also set expectations for the private sector) whose estimated cost is Rs 1500bn.
As an example, salary has to rise to Rs 237,000 to preserve purchasing power of 2019 salary of Rs 100,000 pm. That is food for thought for employers in the private sector
PDL recovery is proposed to be Rs 1280bn based on Rs 80 per litre and doubling it will balance the above salary bill but partially!
If not done now, will not be undertaken in the remaining term of office.
Instead of an aggressive and out of box strategy for SOEs costing Rs 1 trillion per FM, focus this year is on only PIA to be privatized (budget projects Rs 30bn revenue) and 24 entities are to be targeted in coming years.
Home grown strategy requires PIDC to be revived, all SOEs being shifted under it and PIDC operating as an independent entity implementing mergers, disposal, restructuring and investments for growth, conservation, efficiency/productivity enhancements and human resource development.
Despite knowing and being aware that turnaround requires time, patience and endurance with no hopium narrative, the focus continues to be missing on the SOEs and inefficiencies of the energy sector.