Pakistan PM rushes to end energy shortages ahead of 2018 poll

In Abdul Aziz's print shop, the daily blackouts that plunge him into darkness and silence his rolling presses are costly and chip away at his faith in Pakistani Prime Minister Nawaz Sharif.

For nearly a decade, power shortages have hobbled the country's economy and eaten into Aziz's profits, preventing him from hiring more staff or expanding his family-owned business.

Sharif swept to power in 2013 vowing to eradicate crippling outages that brought Pakistan's $250 billion economy to its knees, but he now faces a race against time to stay true to his word before the next general election in 2018.

"If Nawaz Sharif ends (power shortages) by the election in 2018, we will vote for him again," said Aziz, 40, who lives in Sharif's constituency in Lahore, capital of Punjab province.

"If he doesn't, we will not."

Power supplies are not the only factor that will decide any poll. A further escalation in tensions with nuclear-armed rival India could destabilize the government, as could Islamist militant violence or street protests.

But Sharif has greater control over energy supply, and his government has spent billions of dollars building liquefied natural gas (LNG) plants, pipelines and dams, while private investors are financing wind and solar.

A major coal and two small nuclear plants are also due to come online before Sharif's term ends.

The power projects, coinciding with the biggest road building program in Pakistan's history, are central to Sharif's strategy to win the 2018 poll by promoting infrastructure as evidence of economic progress.

Pakistan's sputtering economy has rebounded in recent years, helped by lower global oil prices and improved security.

Chinese companies are arriving in force after Beijing outlined plans in 2014 to invest $46 billion in road, rail and energy infrastructure linking western China with Pakistan's Arabian Sea coast, with two-thirds of the money earmarked for energy.

Stalled reforms

The drive to boost generation above 17,000 megawatts (MW) and plug a 6,000 MW deficit has already yielded some results. Shortages in big cities, which two years ago went without power for 12 hours a day, are down to about six hours.

Sharif vowed last month that all scheduled outages would end before the next election, likely to be in May, 2018. His office said generation would hit 26,000 MW, a 3,000 MW surplus.

There are fears, including within Sharif's own ruling PML-N party, that the room for error has shrunk to zero and the ambitious targets could be missed, especially after two big hydro projects were delayed.

"There are a lot of moving parts with all these projects," said one Western diplomat in Islamabad. "The government has a comprehensive plan, but obviously there is some nervousness about the timelines."

Halting outages would breathe fresh life into Pakistan's economy, which needs to expand above 6 percent per year to absorb new entrants into the job market from a fast-growing population of 190 million people.

Economic growth hit 4.7 percent last July-June fiscal year, the fastest pace of expansion since 2008. Economists estimate energy shortages shave up to 2 percent off annual growth.

Some energy experts say Sharif's electricity goals are within reach.

The Asian Development Bank, lending Pakistan more than $1 billion to help alleviate the energy crisis, expects load shedding, or scheduled outages, will be eradicated by mid-2018.

Scared to privatize?

Sharif's opponents, however, say the government is so fixated on boosting power generation that it has ignored reforms, like privatizing distribution companies, that would modernize the market and lower the cost of electricity.

Many Pakistani businesses complain about the price of power. Lahore barber Eijaz Ahmed, forced to down tools for several hours every day, fumes about spending up to 60 percent of his revenues on electricity.

"I cannot spend money on my children's education because I have to pay (expensive) electricity bills," he said, as his staff sat idle, waiting for power to return.

Fearing disruption by the unions around election time, the government has backed out of privatizing 10 key power distribution companies, which are broadly inefficient, and will now list some of their shares on the Pakistan Stock Exchange.

And though there has been investment in some large-scale transmission lines, there are questions about how older ones will cope with an impending surge in generation.

"None of the institutional things that needed to be done are being done," said Shafqat Mahmood, senior member of the opposition Pakistan Tehreek-e-Insaf (PTI) party.

'Invest in our people'

Government officials concede some key reforms have not been enacted, but say there was simply too much to do in the space of a few years, and beefing up generation took priority. The power market, they say, will be liberalized after the 2018 election.

"We have to work in phases. The first phase will be availability of power and second will be affordability," said Mohammad Younus Dagha, the top bureaucrat at the Water and Power Ministry.

Pakistan's long-term energy plans have also been boosted by the China-Pakistan Economic Corridor (CPEC) project, which has spurred interest from foreign investors.

Dagha said in the 20 years to 2014, Pakistan attracted 10,000 MW in power generation from foreign investors, but after CPEC was announced, Pakistan secured 12,000 MW of future generation from foreign sources in 2015 alone.

Analysts say if Sharif can roll back electricity shortages it would put him in pole position to win another mandate.

People within his party also believe he has been boosted by big infrastructure projects such as slick metro bus systems built on concrete stilts above clogged roads in major cities.

About $9.5 billion is also being spent on road projects due to be completed in the next three years.

"We shouldn't be overconfident, but I fancy our chances," said Miftah Ismail, a businessman who is a special assistant to Sharif.

The opposition has painted Sharif's infrastructure plans as vanity projects and accuse him of inflating Pakistan's debt burden to boost his re-election chances.

In a stark reminder of the challenges facing Pakistan, the World Bank said last week nearly half of the country's children are malnourished.

"In Lahore, you have these mega projects but don't have drinking water which is clean," said Mahmood, the opposition politician. "We need investment in our people."

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