The burning issue under which Nawaz Sharif ran his election campaign last year was Pakistan’s economic debt and its acute energy shortage. The energy crisis gripping the nation has not only resulted in long hours of power shortages and load shedding but has adversely impacted the economy with commercial sectors and industries facing the brunt of the energy crunch. The fertilizer industry for instance has faced setbacks due to the irregularity in the supply of gas, leading to imports of fertilizer when in reality Pakistan has the capacity to produce the same.[i]

 

The crisis has caused a major setback to the economy with concerns being raised due to the increase of the circular debt. Significantly, debt is being incurred as a result of theft and power losses. The circular debt has reached over Rs.300 billion and several transformers such as in Lahore have defaulted adding to the Government’s woes.[ii]

 

However, this internal crisis of Pakistan is taking a significant strategic turn. In August, it was reported that China may help Pakistan to operationalise a 1 GW nuclear power reactor at Karachi.[iii] This raises concerns in India because the nuclear cooperation between China and Pakistan has been strengthening with the addition of reactors to both the Chashma and Karachi nuclear plants. Therefore, the questions to be asked are: how far is Pakistan going to promote its civilian nuclear industry in the light of an energy crisis and more significantly, how far would such a policy impact the regional security dynamics?

 

Energy Shortage and Nawaz Sharif’s Policy

 

Owing to the circular debt and intensive load shedding Pakistan is now placed in a precarious situation on the energy front. Pakistan is highly dependent on thermal power which contributes to around 67 per cent of electricity generation. It gets electricity from hydel (30 per cent) and around 3 per cent from nuclear power.[iv] High dependence on thermal power has led to an increase in prices and made it dependent on international oil prices, which are prone to volatile price fluctuations.

 

Presently, the energy shortage has touched nearly 6,000 MW in April 2014 leading to load shedding for over 12 to 18 hours.[v] Fuel shortages, delays in subsidy payment by the Government and the lack of private players and investments have led to such a severe shortage. Although, Pakistan has hydropower potential (both tapped and untapped), which is cheaper than thermal power, it remains poor in power generation because of the capital intensive nature of constructing dams. Furthermore, poor policies have increased the shortage.

 

The policies implemented by successive governments in Pakistan have proved ineffective as they do not address the core concerns of enhancing efficiency of existing power generation units, a lack of institutional arrangements and implementation of policies without proper assessment has contributed to the existing shortage. For instance, the policy to shift from oil to natural gas without properly assessing the reserves of natural gas has led to increased reliance on oil for thermal power generation, increasing the prices per unit.

 

However, the new energy policy outlined by the Sharif Government has goals set across a three-year period and focuses on the principles of efficiency, competition and sustainability. It aims at reducing supply-demand gap to 0 from 4500-5000 MW per day by 2017, slashing the generation cost of each unit to 10c/ unit from 12c/unit by 2017, lowering distribution and transmission costs by 16 per cent etc.[vi] This policy like the energy policy of 1994 seeks to meet the goals by encouraging local and foreign investments. The need for investments in this sector is high and the Government has sought to reduce subsidies to increase foreign investment and decrease the likelihood of circular debt occurring again.

 

Nuclear Energy and Sino-Pakistan Nexus

 

In this scenario of energy shortages and heightened need to invigorate the economy of Pakistan, the Government has been looking to expand its options to generate power from different sectors. One option has been, to emphasise the civilian nuclear sector of Pakistan. This came to light with the Sharif Government signing an agreement with China to finance a nuclear power project in Karachi worth 9.59 billion dollars and is said to produce about 2,200 MW.[vii] More recently, the alleged operationalization of a 1 GW nuclear reactor is increasing India’s concerns. This deal is unique in many ways as such a reactor comes under the ambit of new technology and the growing cooperation between the two nations in this sector. Moreover, such a deal would have immense strategic ramifications because it has been reported that diversion of nuclear waste from such a large reactor for re-processing would be easier since the protocols followed for standard reactors are not applicable to the 1 GW reactor.[iii]

 

Cooperation between China and Pakistan in the nuclear sector has been deep, with the former being responsible for constructing the Chashma Nuclear Plant which consists of CHASNUPP 1 and 2. Moreover, the construction of a third plant CHASNUPP-3 began in 2011 and that of CHASNUPP-4 is set to begin soon. Significantly, for the first time China has agreed to export the new pressurised water reactor (PWR), ACP 1000. This has raised international concerns due to proliferation threats. Although, some analysts believe that Pakistan would refrain from diverting plutonium towards for it nuclear weapons programme as it would jeopardise its ongoing cooperation with China. Furthermore, Pakistan maintains separate military nuclear reactors at Khushab complex in Punjab which requires plutonium rather than the PWR being provided by China.[viii]  However, proliferation concerns persist because the spent fuel from Kushab is reprocessed at separation plants in Chashma and Nilore which remain outside the purview of IAEA safeguards.

 

These deals with China by the Pakistani Government are seen in the light of the Indo-US civil nuclear deal of 2005, following which Pakistan has sought a similar deal for itself without success. When news of these deals came to light concerns were raised regarding proliferation by the international community, owing to Pakistan’s previous track record on the matter. The US has debated the nature of this deal at the Nuclear Suppliers Group (NSG). Although, the Chashma plant comes under the IAEA safeguards Pakistan is not signatory to the Non-Proliferation Treaty (NPT) and the full-scope safeguards by the IAEA are not applicable to it. Therefore, according to the NSG guidelines members of the international community have maintained that China cannot transfer the technology to Pakistan. However, China sees the deal as a ‘grandfathered’ extension of the previous deals it signed with Pakistan prior to becoming a member of the NSG.

 

The financing by China of the nuclear power projects within Pakistan depicts how China is trying to develop and mature its nuclear sector with Pakistan being its loyal client. China is also involved heavily in supplying nuclear components to the US, Britain and also has struck nuclear deals with Australia and Canada, depicting the scope of China’s nuclear industry.[ix] Concerns regarding proliferation have become pronounced following the expansion of the Karachi plant (two more nuclear power plants) under the current Government. This has also led to fear among the domestic public as it may threaten their livelihood. West of Paradise Point where the reactors are to be constructed lays the village Abdul Rehman Goth, wherein the fishermen are being restricted from entering the water close to the construction site.[x]

 

Disclaimer: The views expressed in this article are personal.

 

[i]Shabbir H. Kazmi, “Pakistan’s Energy Crisis”, The Diplomat, August 31, 2013, http://thediplomat.com/2013/08/pakistans-energy-crisis/1/, (accessed on June 2, 2014).

[ii] Zafar Bhutta, “Power Crisis: Khawaja Asif Looks Heavenward”, The Tribune, July 15, 2014, http://tribune.com.pk/story/735805/power-crisis-khawaja-asif-looks-heavenward/, (accessed on July 15, 2014).

[iii] MadhavNalapat, “China Gifts Pak Mega Nuclear Power Plants”, The Sunday Guardian, August 2, 2014, http://www.sunday-guardian.com/news/china-gifts-pak-mega-nuclear-power-plants, (accessed on August 3, 2014).

[iv] Mirza Hamid Hasan, “An Overview of Pakistan’s Energy Sector: Policy Perspective”, in Solutions for Energy Crisis in Pakistan, (IPIR: Islamabad, 2013), http://ipripak.org/books/secp.pdf, (accessed on June 7, 2014).

[v] Ahmad Fraz Khan, “Power Shortage Leads to 12-18 hours of Loadshedding”, Dawn, April 11, 2014, http://www.dawn.com/news/1099086, (June 14, 2014).

[vi] “National Power Policy: 2013”, Government of Pakistan, 2013, http://www.ppib.gov.pk/National%20Power%20Policy%202013.pdf, (accessed on June 25, 2014).

[vii] Salman Masood and Chris Buckley, “Pakistan Breaks Ground on Nuclear Plant Project with China”, The New York Times, November 26, 2013, http://www.nytimes.com/2013/11/27/world/asia/pakistan-breaks-ground-on-nuclear-power-plant-project-with-china.html?_r=0, (accessed on June 18, 2014).

[viii] Mark Hibbs, “Power Loop: China Provides Nuclear Reactors to Pakistan”, Jane’s Intelligence Review, (IHS: USA, 2014), http://carnegieendowment.org/email/DC_Comms/img/JIR1401%20F3%20ChinaPak.pdf, (accessed on August 28, 2014).

[ix] Hasan Ehtisham, “China has Safe Grasp on Pakistan’s Civilian Nuclear Market”, The Global Times, February 25, 2014, http://www.globaltimes.cn/content/844615.shtml, (accessed on June 18, 2014).

[x] Shadi Khan Saif, “Fears Raised over Pakistan’s Nuclear Dreams”, Deutsche Welle, July 2, 2014, http://www.dw.de/fears-raised-over-pakistans-nuclear-dreams/a-17507182, (accessed on July 9, 2014).