He said there were several factors due to which foreign investment was not coming into the country, ie, power crisis and security/ law and order situation. The Board of international companies take decisions on a set of assumptions like continuity of policies. The other countries took steps to improve investor perception but we stand in the same position.
Pakistan energy consumption, according to OICCI Energy report, is expected to grow by 70% in the next 10 years, substantially adding to the current $ 11 billion energy import cost. Pending commissioning of Thar coal and long gestation hydropower projects, additional power generation is expected to be based on imported coal and LNG which together with high Transmission and Distribution (T&D) losses is going to keep the issue of circular debt and high energy cost under stress for some years to come.
OICCI Energy report has proposed widespread recommendations to streamline the oil and gas, coal and renewable sector including exploration, refining and distribution. The report also highlights various measures required to boost Power generation, Transmission and Distribution. Presenting the details, OICCI President, Khalid Mansoor stated that OICCI Energy Reforms Report has recently been shared with the Prime Minister and Minister for Power Division Awais Ahmad Khan Leghari, and other senior government officials in the energy sector.
Mansoor said the "OICCI members recognize that Pakistan faces several challenges in the energy sector, including the higher cost of power impacting competitiveness of exports and cost of doing business in Pakistan".
"OICCI Energy Reforms 2017 Report," Khalid Mansoor added, "is an effort of OICCI, whose members include some of the most renowned MNCs and Fortune 500 companies operating in Pakistan, to recommend in an actionable format, key policy changes required to optimize the available resources as well as putting the energy sector on a fast-track, in line with the economic growth potential of the country". OICCI Managing Committee member, Jawwad Ahmed Cheema, who is the Chairman of OICCI Energy subcommittee and OICCI Secretary General, Abdul Aleem, were also present at the media launch.
He said the country should continue increasing generation to meet future demand. He said the main issue is in demand and transmission. He said, the government should be given credit for increasing generation by about 10500MW by mid of this year, half of which is already in the system. This demonstrates that determination can achieve results. He was of the view that until existing grid is not reliable with enhanced capacity and targeted approach there is no reason Captive Power Plants (CPPs) will again start getting electricity from public sector due to cost effective power. Major focus should be on transmission and distribution system.
He maintained that consumption of electricity is directly linked with the population of the country, adding that Pakistan's consumption is 450 KWh per year, the lowest in the world even compared with sub-Saharan countries. In regional countries per capita power consumption is around 2000 Kwh.
"If we assume that the economy will grow by 5.2 per cent Pakistan would need 44000 MW in 2025, followed by 6.5 per cent, demand will be 60,000 MW and if economy grows by 6.5 percent in 2030, Pakistan will need 100,000 MW," he said adding that, Pakistan will be in balance situation in 2023 but it has to see how much economy will grow.
He said the OICCI recently conducted a security survey, its 191 member companies term Pakistan as better destination for investment as compared to six regional countries , adding that this is an indication that things are positive in the country.
He said international investors have a lot of reservations on Pakistan's fiscal space and fiscal policies; that's why they prefer other countries of the region, he added. He cited the example of 3 per cent super tax which was meant for one year but is still in place. "If we work on issues with collective efforts and in a structured way, there is no reason that issues cannot be resolved," he continued. The data analysed reveals that when power crisis gripped the country GDP growth rate which was 6 or 6.5 per cent declined to 3 or 3.5 per cent, which shows the co-relation between GDP growth and power availability.
The OICCI has 28 members from the energy sector, belonging to oil exploration, refining, marketing, distribution, coal mining and power generation sectors, with an asset base of over Rs 1500 billion. OICCI energy companies contribute more than Rs 500 billion annually to the national exchequer and have an annual turnover of Rs 1500-2000 billion and employ a large number of highly skilled professionals in different fields.
In upstream sector, OICCI has recommended that indigenous oil and gas exploration and production activities should be accelerated to make affordable energy available to the consumers. One of the policy recommendations by OICCI is to segregate Policy and Regulatory functions at the Ministry of Petroleum besides accelerating the award of new exploration licenses, with additional focus on tight gas development, offshore exploration and introducing marginal field policy. Timely completion of power transmission and distribution projects is critical to adding generation capacit in the system including from Thar Coal Block II which is going to add 4000 MW by the end of 2025.
Giving highlights of the areas for reforms in the downstream sector value chain, Jawwad Cheema noted that no policy has been formulated for this sector since 1997. The OICCI report has recommended building new Oil Refineries, enhancing the existing refining capacity, and improving the fuel specification, import infrastructure, transportation value chain, fair and transparent pricing mechanism, improve quality of OMCs and most importantly to allow only serious players to operate in the downstream sector.
In the power sector, LNG is termed a quick but temporary solution and the government has been urged to move towards self-reliance and indigenization of untapped coal, hydro, wind, solar and tight/shale gas resources. OICCI has also recommended replacement of inefficient, costly and heavy furnace fuel plants in a phased manner. Nepra has also been requested to ensure cost reflective tariffs that incentivize investment in the distribution sector.
The OICCI envisages that by 2020, the energy mix of the country would marginally improve with less dependence on oil and increasing share of LNG, coal and renewable energy. This energy mix can further improve with the judicial implementation of OICCI energy recommendations in the larger interest of the energy security and economy of the country.
OICCI members contribute, annually, over one-third of the revenue collections in the country by the federal and provincial revenue authorities and invest over $ 2 billion annually as new capital expenditure.