SANEI: Ongoing Studies

Power Sector Reforms in India and Pakistan : Scope for Cross Border Trade in Power

India and Pakistan together possess vast stores of energy. However, both these countries continue to be chracterised by poor quality of energy infrastructure, skewed distribution and inaccessible and costly energy availability. Their heavy dependence on traditional sources of energy and import of petroleum have had serious adverse impact on environment and balance of payment problems respectively.

In the commercial energy front also, energy prices have been often too low, revenue collection unsatisfactory and the system losses enormous. These are doubly enhanced by inefficient and technically unsound distribution net work, overstaffing, poor management, weak administration, undisciplined employees and corruption both at utility and consumers levels.

Both India and Pakistan have introduced massive reforms in the energy sector. The restructuring is aimed at making their operations more efficient and financially viable. A large number of private sector investors have entered into the power sector.

Both these countries are largely energy importers and have increasingly faced a serious power shortfall thereby adversely affecting their productive activities, social development and investment climate. The power deficit is likely to deepen further.

There have been negotiations going on between India and Pakistan on the possibility of power trading . Given the demand and supply situations in the sub-continent, it is rational to believe that the trade in power will be mutually beneficial in terms of both economic and political gains.

Pakistan is currently producing surplus power. This is likely to be consolidated by a number of ongoing projects. In India, the northern and the eastern regions are the potential markets. Pakistan’s exports of power would add a non-traditional high value item in its basket and would doubly enhance the capacity utilization of power plants. The transmission lines network on both sides of the border are extensively available.

However, the key issues to be settled before the cross border flow is concretised are the cost of transmission line and its sharing mechanism; the determination of power tariff; the payment mechanism including the currency and the channel to be used, power supply sustainability and geo-political immunisation. This cross border trade may work as an effective confidence building measure in India-Pakistan relations.

This study will examine the state of power sector reforms in India and Pakistan and assess the possibility, importance and implication of cross-border power trade between these two countries.

The theoretical underpinning for this study will include a model for cross – border exchange of power. It would examine both the major trading mechanisms viz., i) pool based and ii) bilateral power trade. This would involve extensive field visits, collection of data and information and interviews with the power sector players both in the government and private sectors.

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