Pakistan faces an acute energy crisis, suffocating industry and making life unbearable for house owners in hot weather. Power cuts have recently led to widespread civil disturbances. With each degree rise in ambient temperatures, the disturbances are likely to exacerbate which may reach almost uncontrollable situation. So question that arises is: Is there any light at the end of the tunnel? Is there any alternative or alternatives? The answer is that there are indeed alternatives available, but we cannot practice them because we have betrothed ourselves to World Bank-IMF dictated reforms catering to the interests of big businesses and multinationals. [In the image above Pakistani technicians work on power lines in Karachi.]
ELECTRICITY PRODUCED FROM INDIGENOUS COAL & GAS AND NOT THE IMPORT OF ENERGY, IS THE REAL SOLUTION TO OUR ENERGY CRISIS
by Manzoor Ejaz
One day we are told that Pakistan will import 1,100 megawatts of electricity from Iran, while the next day it is India anxious to export 5,000 megawatts to Lahore. Constant noise is made of gas pipelines from Iran, Central Asia and Qatar. All such claims are phony because Pakistan is financially incapable of importing electricity or gas from abroad. As a matter of fact, Pakistan does not need to import any energy from abroad because the shortages are not a question of resources but of financial management of the sector.
Present weak governance, surviving on opportunistic allies, is inherently incapable of solving the energy problem.
Everyone in Pakistan knows that in some days there is no load-shedding while on other days electricity disappears for more than half of the day(s). This simply means that Pakistan has the capacity to produce sufficient electricity to fulfill her needs and there is no need to import. Experts of the international agencies studying Pakistan’s energy sector hold a common view that the real issue is that per unit cost of production of electricity is higher than what per unit is actually collected.
Presently, per unit cost of production is about 8 cents while the collection after land losses—a respectable name for theft—is about 7 cents per unit. One cent loss per unit results in losses of 1.5 billion to 2 billion dollars per year. Hence Pakistan has no financial means to meet this loss, it cannot pay the Independent Power Producers (IPPs) or other related entities in the private sector. Consequently, the private sector stops producing electricity and shortages develop.
Fortunately, whatever amount of electricity its made available to users is because of hydro power generated from Mangla and Tarbela dams. Hydro power from these dams constitutes a 30% of the total electricity available which is sold to distributors for one to one and a half cent. If such a dirt cheap hydro power is taken off the total mix, the cost of production will jump to 10-12 cents per unit wrecking the households and the industries.
Experts believe that to get quick results several successive governments have been investing in oil dependent plants rather than hydro power generation. And, since the price of oil has increased tenfold, the cost of power generation has soared. Despite government’s 85% increase in per unit price last year the sector is still in deep red and financial losses are accelerating. Consequently the policies regarding IPPs and rental plants along with theft have wrecked the entire energy sector.
Most of the experts believe that to get quick results several successive governments have been investing in oil dependent plants rather than hydro power generation. And, since the price of oil has increased tenfold, the cost of power generation has soared. Despite government’s 85% increase in per unit price last year the sector is still in deep red and financial losses are accelerating. Policies regarding IPPs and rental plants along with theft have wrecked the entire energy sector.
For example, take the rental plant case. If Pakistan rents power plants, then rents are due every month whether electricity is generated or not. To run the rental plants, diesel is necessary and if the government cannot afford to buy diesel then the plants will standstill and rents will be still accruing. Rental plants have damaged governments owned efficient plants as well: To pay the rental plants government owned plants’ up keeping is neglected resulting in their shutting down.
Similar negative outcomes are associated with IPPs. The government is contractually obligated to buy a certain amount of electricity from these entities. IPPs will generate power if the government pays its dues otherwise production is stopped. However, in such situation the government will be accumulating the debt. It has been rumored that certain IPPs look for excuses to blame the government and charging it without producing any electricity. In short, the government has created such a mix of power generation that is messy and too expensive.
According to some reports the electricity theft has increased from 10% to 30% during the PPP rule. Electricity theft is done by government’s own bigwigs or their allies. Electricity theft is so common in Karachi that kundas (hooks) to steal are publically sold. Karachi Supply Company (KSC) can end such theft and collect penalties. However, if KSC takes steps in this direction, the Muthidda Qaumi Movement (MQM) raises political hell and the PPP government concedes to its demands.
But KSC asks the government to provide it cheaper electricity from national grid to make up for the losses. Consequently, KSC stops producing from its own plants and distributes government supplied cheaper electricity. This shows most of the electricity theft is not a technical problem but a political hurdle that the present weak government, surviving on unruly alliances, cannot manage.
Structurally, the composition of electricity sector is a financial trap for the government. Unless cheaper hydro power is increased in the total mix, affordable electricity cannot be supplied to consumers and industries. Despite the fact that hydro power generation takes about 10-12 years from planning to completion, the government should plan abandoning the quick diesel based plants and start production from other indigenous resources like coal and gas. According to experts if the government increases the price paid to gas producers they can add sufficient quantity and it will be much cheaper than importing from Iran, Central Asia or Qatar.
Disclaimer: The views expressed in this report / article / Op-Ed are the sole responsibility of the author or the source from where this material has been taken. These may not necessarily reflect those of the ‘Wonders of Pakistan’. The contents of this article too are the sole responsibility of the author (s) or the source. WoP will not be responsible or liable for any inaccurate or incorrect statement / s contained in this post.
YOUR COMMENT IS IMPORTANT
DO NOT UNDERESTIMATE THE POWER OF YOUR COMMENT