. . . . . .  
 
 
 
 
30/05/2024
THE HEAT IS ON
on PAKISTAN'S POWER PREDICAMENT


 

One day it was the cool comfort of spring. The next morning summer arrived with the force of an unwelcome intruder. Until October, life will be hell on earth, especially in hell’s scorching suburb called Pakistan.

Yet again, our nation is caught between mismatched policies and their endless impact, between our energy requirements and erratic availability. Over the past thirty years, every government has laid a Humpty Dumpty egg of an energy policy. In March 1994, a new Energy Policy, issued with the benediction of the World Bank, addressed three aspects: our inadequate capacity (then 10,800 MW), the growth pattern of demand over the previous 25 years (8% per year), and an anticipated requirement of 54,000 MW by the year 2018.

In September 1994, the U.S. Secretary of Energy Hazel O’Leary (a political version of Tina Turner and later president of an insolvent Fisk University) led a delegation of 90 American business persons to Pakistan. During her quasi-state visit, 16 agreements were signed envisaging an investment of $4 billion in Pakistan’s energy sector. Within two months, the Power and Infrastructure Board (PPIB) boasted that it had received `an overwhelming response …with applications for over 25,000 MW against the target of about 5,000 MW till Dec. 1997’. It also announced that the discovery of coal deposits in the Tharparkar area of Sindh were `so large that even if half of it is extracted it can provide fuel for 100,000 MW power plants for 30 years.’

Thirty years have passed. According to NEPRA’s State of Energy Report 2023, Pakistan’s installed capacity in June 2023, stood at 45,885 MW, well below the 1994 projections of 54,000 MW. The installed capacity for imported coal-based power projects is 3,960 MW, while local coal, sourced from Block-I and Block-II of Thar Coal mines, contributes 2,640 MW (2.6% of 1994’s ambitions). Feedstock of coal-based plants is imported, like the expensive ore used to bankrupt Pakistan Steel Mills. It comes from South Africa and Indonesia under long-term contracts, their price ‘unregulated, lacking oversight in terms of price determination.’

The 1994 Energy policy introduced an innovative Bulk Power Tariff (BPT), comprising an Energy price and a Capacity Price at a notional total of US 6.5 cents per kilowatt hour. The Energy Price covered Fuel cost and the Variable Operating costs of the power plant (US 2.2 cents). Responsibility for fuel supply lay on the Government through Pakistan State Oil (PSO) or Sui Southern Gas (SSGC). The Capacity Price of US 4.3 cents was calculated to cover debt repayment obligations, fixed Operating and Maintenance Costs and Return on Equity (17%).  The private sector plants were protected against WAPDA waywardness through Take or Pay provisions in Power Purchase Agreements. Under these ‘Take or Pay’ clauses, NEPRA tells us, ‘payments are made for contracted capacity, regardless of whether it is consumed or not. The unutilized capacity places a financial burden on electricity consumers, who end up paying for unused power. During FY 2022-23, the utilization factor was 34% [...] and the amounts paid to power plants amounted to Rs.46.59 billion’.

In the 1990s, to improve efficiency in transmission and distribution (T & D), the World Bank persuaded the Pakistan government to unbundle WAPDA’s downstream monopoly, creating independent localized distribution companies (LESCO, PESCO, etc.). Today, there are twelve, each operating at varying levels of inefficiency. Distribution losses involve a loss of Rs.160.5 bn. PESCO alone accounts for half the losses – at Rs.77.35 bn. – an unnecessary threat to inter-provincial harmony. Government officials watch mindlessly as Pakistan's energy sector circular debt ‘has jumped to Rs.5.7 trillion as of November 2023’. Rs.2.7 trillion is owed in the power sector and Rs.3.0 trillion in the gas sector.

Yet, the World Bank still advises that ‘companies specializing in infrastructure development can participate in projects aimed at enhancing the energy distribution network’.  And the Asian Development Bank has committed $250 million for ‘the Power Transmission Strengthening Project, which will help boost national grid stability, energy security, transmission capacity, and effective national transmission system management.’

Meanwhile, the Pakistani consumer faced with daily power outages and escalating monthly energy bills wonders whether there is a solution to this power conundrum? Or are we condemned to scavenge for private sector alternatives (like home generators and rooftop solar panels) to compensate for public sector incompetence?

One is reminded of the response given by P. Chidambaram (then India’s Finance Minister) to an inquisitor who asked him how he intended to implement his government’s plans. His terse reply was: ‘By doing it’.

Pakistanis can do it. They succeed everywhere else. Their flesh is willing; only their governance is weak.

 

F. S. AIJAZUDDIN

 

[DAWN, 30 May 2024]

 

 

 
30 May 2024
 
All Articles
 
Latest Books :: Latest Articles :: Latest SPEECHES :: Latest POEMS