FACTS SHEET ABOUT
$1.25 trillion (2002)
7.5 percent (2002)
0.5 percent (2002)
$135 billion (2002)
9.0 percent (2002)
4 percent (2002)
$266.6 billion (2001)
$243 billion (2001)
Undoubtedly, the high cost electricity being produced
in Pakistan has become one of the major issues confronted not only to
the economic growth but has steeply eroded purchasing power of the
This formidable issue becomes more alarming
especially in the face of globalization of the trade under WTO regime,
in view of the high cost of production on account of expensive
electricity which may render the domestic manufacturing sector paralyzed
to compete with the much cheaper foreign products which have already
flooded the local market.
The only way out apparently lies in bringing down the
electricity charges for which the government besides taking certain
corrective measures has also formed a task force with an assignment to
find ways to find out the workable and effective ways and means to
address the issue.
Out of the total over 17,726 megawatt generated in
the country, about 69 per cent is thermal, produced by thermal/based
system, while the remaining 29 per cent is produced through hydro-system
while only 2 per cent is said to be produced by nuclear technology.
The government under its energy policy has chalked a
comprehensive plan to produce electricity at affordable price by
applying technology for cheaper fuels like gas, coal and the nuclear
technology to meet the growing need of electricity in the days to come.
In order to achieve the desired results, the
Government of Pakistan has entered into different agreement with
friendly country China which has agreed to provide technical assistance
in developing coal-fired electricity generating plants at Thar coal
fields. Under this agreement, a Chinese firm will be erecting two
coal-fired power plants of 300megawatt. These coal-fired power plants,
in fact may have far reaching effect both on the social as well economic
life especially in the deserts of Sindh.
COAL-BASED POWER PLANTS
Pakistan consumes about 78 per cent of imported fuel
oil to generate electricity and other oil based industries which
certainly is a costly affair.
Although the oil consumption fell 21 percent to
898,000 tons down from 1.14 million tons, yet the total cost on imports
is too high for the national economy absorb.
Besides, the oil bill fell by 4 per cent to $679 in
the three months up to from $708 million during the current year mainly
due to shift on natural gas, yet its only an eye wash when compared to
the cost of total oil imports which was over $3 billion last financial
Pakistan's gas demand is expected to grow to 5.5
billion cubic feet a day by 2012 from 2.6 billion cubic feet now. The
government seeks to have most power plants funning on gas or coal by end
of this year.
Oil bill and consumption will fall further in the
current fiscal year as most of the power producers and cement makers
will also switch to gas. Pakistanís imports of crude oil and oil
products in the year to June 30 rose by 9 per cent to $3.06 billion from
In the wake of President Pervez Musharraf's visit to
China last month, China has agreed to provide a credit line of $ half a
billion on soft term basis which would be utilized for the projects to
be undertaken with the assistance of Chinese companies.
The agreement on the installation of a 600mw Thar
coal power generation plant has already been reached with a leading
Chinese company Shanhua for developing a coal-fired power generation
plant near Thar coal fields. In the first phase, the Chinese company
will start work in about 50-square km of Thar coal area and install two
coal-fired power generation plants each of 300mw capacity.
The Chinese company Shanhua was also actively busy in
preparing the feasibility study of Thar coal to ascertain the
gasification of the coal and coal bed methane (CBM). China would also
help Pakistan in installation of 3000MW power generation plants after
the completion of work on these two power plants.
Although the government plans to meet 20 per cent of
total demand for energy through coal-fired power generation plants with
a total generating capacity of 3000 megawatts all over the country, and
600 megawatt at thar, practical steps are require to be taken on war
footing as the demand for the coal would increase in the days to come.
Currently, most of the cement producing has already been shifted to coal
while other industries, besides power generating units, are also
intended to move towards this cheaper fuel. The growing demand for coal
has a sharp impact on the prices of coal which have recorded about 100
per cent increase during last few months. According to a report, the
Lakhra coal was selling at Rs700 per ton have jumped to Rs1500 per ton
during last few months. This situation calls for immediate steps for
development of Thar coal fields have huge reserves estimated at 185
billion ton. These reserves include the recently discovered huge
deposits of coal estimated around 175.5 billion tones in Thar area.
Significant coal deposits suitable for power generation are also
available at Sonda and Lakhra areas in Sindh and at salt range of Punjab
and other coal fields in the province of Balochistan.
It is interesting to note that so far the neglected
areas where coal fields are situated have suddenly become prime lands
and a windfall for the people who own these lands in different areas of
The natural gas has assumed a key role in the energy
sector of Pakistan during last few years. The growing use of natural gas
in the sectors like power generation, transportation and other
industries in the current energy scenario of Pakistan, there are
apprehensions in some quarters that the country might be facing a
shortfall in the supply of natural gas in the years to come. The fast
depleting reserves at Sui, so far having the largest reserves and a slow
pace of development of the newly discovered gas sources in Sindh, there
are feelings in some circles that Pakistan should also consider about
the import of liquefied natural gas (LNG) to overcome the projected
shortfall in future.
According to an estimate, Pakistan will begin facing
gas shortfalls to the tune of 839mmcfd in 2010, which is expected to
reach the 6,708mmcfd mark by 2025.
Quoting these estimates from the government
documents, officials of a foreign bank have advised Pakistan's top
energy and financial authorities to go for the liquefied natural gas
imports and restructure electricity tariffs to attract LNG investors
because cross border gas pipeline imports carried a lot of political and
This advice was given at Pakistan Energy Forum
organized by ABN AMRO Bank last week. The forum was presided over by
Finance Minister Shaukat Aziz and high officials from power producing
companies including WAPDA, KESC and other private sector power producing
The bank's officials were of the view that low cost
sources of energy i.e. hydel and nuclear could also not be offered to
the private investors because of their highly political nature.
They said that Pakistan's plans for cross border gas
pipeline from Turkmenistan, Iran and Qatar contained extremely high
political risks outside Pakistan and were very difficult to be sold to
the international investors and financial institutions given their price
tag ranging from $2-4 billion.
Contrary to that, the LNG prices were on the decline
in the international market due to over production and some of their
sources in the middle east were in the chose proximity of Pakistan and
its shipping and transportation costs would be low, however, they did
not mentioned how long the international LNG market would remain
Pakistan has been trying to replace high cost fuel
oil with the increased domestic gas production and imported gas to
minimize the foreign exchange expenditures. It has so far seriously
pursued gas imports from Turkmenistan, Iran and Qatar through pipelines.
The ABN-AMRO officials however said there were a lot
of opportunities in gas sector which suggested foreign investors and
financial institutions to invest in the vibrant energy sector of
Some of these opportunities were included the growing
power demand in view of economic growth, deregulation and privatization
policies of the government, availability of a log of domestic oil and
gas reserves, investment for system expansion, attractive fiscal
incentives, the improved financial profile of the gas utilities and
positive outlook of Pakistan sovereign credit rating. The forum was
informed that the government had planned to construct gas storage
facilities to ensure availability of gas during winter peak season to
the northern part and power sector of the country.
Pakistan's Water and Power Development Authority (WAPDA)
has signed a $128 million contract agreement with the Chinese firm Dong
fang Electric Corporation for construction of Jinnah Hydro-Power Project
on Engineering procuring and construction basis.
The project implementation comprises of designing
execution and completion of civil, electrical and mechanical works
including remedial works to rectify any defect developed during the
process. The Memorandum of Understanding (MoU) for this project was
signed some two years ago.
Under this turnkey contract agreement, the Chinese
firm would arrange 85 percent of the contract price under supplier's
credit and rest of the 15 per cent would be arranged by WAPDA as advance
payment. Pan Jising, Vice President and Chief Economist of Dong fang
Electric Corporation has termed this agreement as another milestone in
the friendship between the two countries.
The proposed Jinnah Hydro-Power Project will be
constructed on the right side of the existing Jinnah Barrage on the
river Indus, five kilometers downstream of Kalabagh in Mianwali
district. The low head hydro-power project will utilize a gross head of
4.88 meters to move 8 power units and generate 96 megawatt. The cost of
electricity produced by this project is estimated at 3.30 cents per
unit. This project is should be completed in 48 months from the date of
commencement of work at site.
Historically speaking, China has lent a strong
helping hand to Pakistan in developing for several other mega projects
such as Chashma Nuclear Power plant, Heavy Mechanical Complex,
development of Thar Coal and Saindak Copper and Gold projects and of
course the construction of the most prestigious project of a third deep
sea port at Gwadar in Balochistan.
The Pakistan Atomic Energy Commission (PAEC) has been
advised by Prime Minister Zafarullah Khan Jamali to prepare a vision
2025 on a priority basis with a focus to develop a strong base of
nuclear power plants in Pakistan. Application of nuclear technology for
generating electricity in Pakistan deserves high priority in view of its
nature of being environment-friendly and cost-competitive aspect.
In fact, the need for producing cheap electricity for
rapid development becomes imperative in the face of fast changing global
economic scenario demanding to go for all options such as coal, gas;
hydro and nuclear resources which should be exploited to the fullest for
economic progress of the country.
It is learnt that plans by China to build a second
nuclear power plant in Pakistan are nearing completion. At present
details are being worked out to give the project a final shape.
It may be recalled that a memorandum of understanding
for the project was first signed in March when Prime Minister Jamali had
visited to China.
As a result of negotiations, China agreed then to
finance and build a 300 megawatt nuclear power plant at Chashma.
Pakistan and China further spruced up the plan in November when
President Pervez Musharraf visited China. China has already built a
nuclear power plant at Chashma. It started power generation in December
Cooperation between China and Pakistan regarding
nuclear energy generation is purely for peaceful purposes and does not
violate any non-proliferation obligations or China's export controls.
Chinese nuclear energy cooperation with Pakistan being carried out under
safeguards put in place by the UN's International Atomic Energy Agency (IAEA).
Some quarters, having a negative approach, however
did not like the close cooperation between Pakistan and China and were
trying giving color that China was providing assistance in production of
nuclear war heads.
With a view to brush aside all rumors, China has
categorically stated that China would not help other countries to
develop nuclear weapons or any nuclear facility not placed under IAEA
China will also not conduct personnel and
technological exchange or cooperation with any other country. This was
stated in a white paper on China's Non-proliferation Policy and Measures
issued by the Chinese government last week.
The paper in implied term sets aside all allegations
of China's help to Pakistan or any other country to develop nuclear
weapons of any kind whatsoever.
China has reiterated its firm stance of opposing the
proliferation of all kinds of weapons of mass destruction including
nuclear, biological and chemical weapons and resolutely opposed the
proliferation of such weapons and their means of delivery.
Exports of Pakistan to china have been growing since
1996-97 mainly due to increasing exports of Pakistani textile products
to China, but the trade balance is in favor of China. Pakistan's exports
to China increased from $103.4 million in 1996 to $303.9 million in
2000-01 but declined to $229.1 million 2001-02 whereas imports from
China decreased from $542.9 million in 1996 to $394.4 million in 1998-99
but again increased to $575.4 million 2001-02.
China had provided the concrete and meaningful
support to Pakistan in accomplishing some complicated and basic
industries and infrastructure projects in the country. These projects
include Karakoram Highway, Heavy Mechanical Complex, Forge and Foundry
Project, Heavy Rebuild Factory, Guddu-4 Thermal Power Station,
Jamshoro-2 Thermal Power Station, Heavy Electrical Complex near Haripur
and appreciable assistance in agriculture sector. China has also offered
technology transfer in 300 agro-based projects to private sector under
its 'Spark Program' and handed over the list of projects to the Karachi
Chamber of Commerce and Industry as the prospective joint ventures among
the private sector of both the countries.
Both countries are also cooperating on a mega project
to provide sea and land route, international import-export, transit
trade and traffic facilities for Afghanistan and Central Asian States as
well as via Gwadar along with Balochistan coast.
Jia Qinglin, Chairman of National Committee of the
Chinese Peoples Political Consultative Conference (CPPCC), who is
currently visiting Pakistan, has said that Pakistan-China traditional
friendship will remain dynamic forever.
The visiting Chinese leader expressed his strong
belief that in the years to come, our exchanges and cooperation in all
the areas will continue to grow and our traditional friendship will
remain dynamic forever. He said this while speaking at a dinner hosted
for the visiting Chinese delegation by Senate Chairman Mohammadmian
He said Pak-China friendship dates back to ancient
times, adding that as early as 2000 years ago, the Silk Road linked our
two countries together.
Referring to President General Pervez Musharraf's
recent visit to China, he said President Musharraf and President Hu
Jintao signed the China-Pakistan joint declaration on the directions of
bilateral cooperation, which identified the way forward for our
bilateral relations in the new historical period.
Jin Qinglin said our all weather friendship and all
directional cooperation were a model of peaceful and amicable
co-existence between the countries of different social systems and
Twenty-odd years ago, China had adopted the policy of
reform and opening up, and embarked upon the road of building socialism
with Chinese characteristics. China has since concentrated on the
modernization drive and improvement of its people's living standards,
and has, thus made remarkable achievements.
A long-term international environment of peace and
stability, and a friendly relationship and cooperation with the
countries across the world were essential for China's development.
The Chinese government highly values the friendship
with its neighbors. We will adhere to the principle of making friends
and partners with our neighbors, strengthen friendly and cooperative
relations with them, including those in South Asia and promote regional
With the concerted efforts of the people of China and
South Asian nations, China-South Asia relations will be better and a
On the occasion the Senate chairman Mohammadmian
Soomro appreciated the Chinese support to the development of Gwadar Deep
Sea Port which would be linked through a network of roads to northern
Pakistan and China.
Although Pak-China cooperation especially in the
power generation sector is moving in the right direction, yet the
consumers need immediate relief. According to five year plan for
rationalization of the electricity charge, the existing tariff structure
is discouraging investment in the producing sector and has severally
affected the consuming sector as well. The power data of last couple of
years has shown a persistent decline in the consumption of energy in
industrial sector. This indicates stagnant growth in the manufacturing
sector besides stalled investment in the manufacturing sector mainly
because of high rates of electricity in Pakistan. It is unfortunate that
both WAPDA and KESC despite all efforts are failed to check its losses
on account of power theft which is estimated over 40 percent in both the
utility companies. People especially in low and middle income groups
resort to power theft because of high tariff and the trend is likely to
continue unless the government provides electricity to the consumers at
affordable rates in conformity to the average income of the masses.
Besides high cost of power generation, the real factor for raising the
electricity price is the levy of heavy taxes on consumption of
electricity in Pakistan. These government levies on electricity
consumption are recommended by the IMF which has turned these utility
companies into tax collecting agencies. The economic managers, while
taking decisions are required to look into the matter within our own
perspectives, instead of seeing through the colored glasses of the
people who are not accustomed with the harsh realities experienced by
the masses in this country.