Power is complex phenomena. Electric power system is
no exception. Apprehensions are that the country might experience
serious power shortages for which there could be many reasons. Main
causes are limited addition in generation capacity as against rising
demand and lower anticipated hydel generation due to severe shortage of
river water. Power shortage is sometime further aggravated due to
absence of alternate transmission options or poor upkeep of transmission
and distribution systems.
Prolonged power shortages, due to whatever reason,
adversely affect economic activities and cause inconvenience
particularly to small industries, commercial establishments and
household consumers. The rich and the resourceful as well face
inconvenience when their in-house diesel generators also fail them.
Power shortages are met through rationing and blackouts, which if
prolonged and more frequent, might also have political implications.
Moreover, power shortages might affect different areas and regions
differently due to the location of power generation plants vis-a-vis the
load centres. The power shortages might also jeopardize efforts to
reduce tariff to industries for their export competitiveness. The
international high oil prices at present are likely to add pressure to
keep power tariff high. In the absence of corrective measures, we might
have difficult times ahead.
During 2003-04, the country saw nearly 10% increases
in generation capacity due to coming on operation of more hydel plants.
Of the total capacity, hydel generation is now 34% (6,696 MW) as against
28% (5,009 MW) last year. Total installed capacity at 17,776 MW in
2002-03 has risen to 19,478 MW. Wapda system owns the lion's share of
existing installed capacity at 59% (11,436 MW). The share of the IPPs is
30% (5,824 MW), Nuclear over 2% (462 MW) and KESC 9% (1,756 MW).
Increase in hydro power and use of gas for power generation particularly
by KESC, reduced import of furnace oil during 2003-04 and thus had
useful impact on country's balance of payments. Lower hydel generation
coupled with higher thermal generation to make up the shortfall in the
current year would push up imports of furnace oil and bring our balance
of payments under pressure. Water level this year is said to be 44%
lower than its total capacity in Tarbela and 37% lower in Mangla.
The PPIB has released on its website Power
Supply-Demand situation in the country for the period 1999-2000 to
2009-10. Firm generation capacity has been compared with peak demand for
each year. According to these figures, the country is expected to face a
deficit of 411MW in 2005-06, rising to 5,529 MW by 2009-10. Demand for
power has increased faster lately due to better business conditions and
power shortage is likely to hit the country earlier than estimated.
According to other estimates, the country could face a power shortage of
around 7000 MW by 2011, if emergent steps for power generation were not
taken. It may be noted that per capita electricity consumption in the
country is only 404 kWh which is exceptionally low and indicates stage
of our economic development. Moreover, there is large pent up demand for
electricity as a large section of the population as yet has no power
connections. The country needs substantial new power generation
Sectoral consumption of electricity at present is
skewed more towards household at 44% of total, as against industry at
31%, commercial at 6%, agriculture at 12% and other government at 7%.
share of industry could partly be low due to installation of captive
power generation plants by different large industries. For accelerated
economic development, one would wish that consumption by the industry
and commercial sectors was higher than the household.
The government is reportedly anxious for installation
and operation of around 2600 MW thermal power capacity during next two
to three years. The effort appears to meet the rising demand and also to
compensate for expected big drop in hydel power generation due to
unprecedented water shortage in the coming months. There is a
possibility that if power shortages persist, the government might
reconsider policy on using furnace oil for power generation, the use of
which for new projects has been discouraged in the Power Policy-2002.
The policy encourages generation through domestic coal and hydel power.
The federal government, the provincial governments
including the government of AJ&K, Wapda and KESC are taking measures
for facing impending challenges of electricity system. New generation
capacity is being encouraged. Besides, funds are being given to Wapda
and KESC for revamping transmission and distribution systems. Both,
Wapda and KESC would also be re-activating their old thermal plants to
meet the shortfall. These are positive developments and should help.
However, for successfully meeting the challenges, fresh policy measures
coupled with larger financial allocations are needed to transform
existing power system into a modern system capable of supplying reliable
power to all consumers particularly industry and information technology
The PPIB, the one-window institution working under
the Ministry of Water and Power, has already approved eight new power
projects for which the Letters of Intent (LOIs) were issued under Power
Policy-2002, with expected completion around 2008. These projects are
Jarwar Project (123 MW), Western Thermal (150 MW) at Karachi, Intergen
Power Project (150 MW) in NWFP, Fauji Thermal (150 MW) at Karachi,
Balloki Thermal (400 MW) in Punjab, Kotli Hydro Power (97 MW) in AJ&K
and Munda Hydro Power (740 MW) in NWFP, with aggregate generation
capacity of 1,985 MW. The pre-qualification reports for the sponsors of
these projects were prepared by PPIB as per international standards.
Approval for other seven projects having generation capacity of about
600 MW is under process. The whole process including financing close and
actual implementation needs to be expedited to meet the power shortfall.
The provincial governments of Punjab, NWFP, Sindh and
the government of AJ&K are pursuing installation of power generation
projects in their respective areas. While NWFP and AJ&K are working
on hydel generation, Punjab is pursuing both hydel and thermal, while
Sindh has focused on thermal projects particularly based on local coal.
Wapda and KESC are also anxious to reactivate old thermal power plants
with a view to meet the impending shortfall in power generation.
Coordination and cooperation among all stakeholders might increase the
chances to bring more capacity on line and in a shorter period. It is
expected that the two utilities have already examined the pros and cons
of reviving the old thermal plants in Sukkur, Quetta, Multan, Lahore and
Karachi at a time when a number of other power plants are under
different stages of approval or implementation.
The IPPs are committed to make entire capacity
available to Wapda or KESC as the case may be, at their option. The
expected shortfall can be partly met if Wapda and KESC require the IPPs
to supply maximum power. As the IPPs would be operating near full
capacity, total average cost per kWh will drop and utilities are
expected to be better off.
Wind power and solar power at present are in
development stage in the sense that these have cost of generation per
kWh much more than the cost of traditional thermal or hydel power. These
alternate sources might be useful for specialized use but they shall
have to first become competitive for use of electricity so generated by
the consumers such as households, industry or commercial. Therefore,
wind or solar power might not be a big help for meeting the impending
shortfall in power supply due to lower hydel generation or other
KESC is dependent on Wapda system for nearly 40% of
its total purchases of power. In case WAPDA system faces shortage due to
low hydel generation, it is unlikely that Wapda will supply to KESC with
the usual load. Even if Wapda agrees to help KESC, it might not be
economically possible for it to supply power at old rates of Rs 3.70 per
kWh. Therefore, KESC might not be fully protected from adverse impacts
of power shortage. Severe capacity shortage with KESC has developed due
to various reasons. At one time, the government did not approve request
from KESC for replacement of an old power plant at Karachi. Moreover, of
the large number of IPPs wishing to set up new power generation capacity
around Karachi City, only two IPPs, namely Gul Ahmed and Tapal finally
materialized with aggregate capacity of around 260 MW. The government is
urged to make sure that more generation capacity is installed in and
around Karachi to meet the increasing demand of the industrial hub.
Moreover, the linking of Hub Power with Karachi through a transmission
line might also be expedited.
The Prime Minister attended on 9th September 2004 a
presentation by the Punjab governor on supply and demand of gas and
electricity in different cities of the Punjab. The Prime Minister
stressed the need for adopting a proactive policy to increase power
generation so as to meet growing demand of economic sector. He
reportedly told the PPIB to solicit investment in power generation. He
stressed the need to adopt a more dynamic and focused policy for power
generation in the country in order to meet the domestic and industrial
demands. He added that Wapda and private sector power companies should
be facilitated to generate more electricity to meet the demand of the
industrial sector. He asked Wapda to ensure that power stations
generated electricity to their optimum capacity. The Federal Minister
for Water & Power has reportedly also asked for simplifying the
procedures and expediting the matters for increasing power supply. In
this context, the following suggestions are offered for consideration by
1. There is
need to review the Power Policy-2002 in consultations with the
provincial governments including the government of AJ&K and other
stakeholders. Moreover, it should include clear policy for the captive
power plants currently operating in Pakistan. These plants at times can
also supply power to the national grid if the price is attractive and
the procedures are hassle-free.
2. The PPIB
has the experience and minimal manpower for the purpose but there is
immediate need to strengthen the institutional capability at the
provincial level including at the government of AJ&K. The needs of
all these institutions might be assessed and funds/manpower provided to
them to easily handle the increased workload due to accelerated
installation of new power generation capacity.
3. There is
need to re-activate the Private Sector Energy Development Fund (PSEDF)
of the government, earlier entrusted to NDFC for administration, now
with National Bank of Pakistan (NBP) with which NDFC has since been
merged. The PSEDF might be made a bank for the financing of the
infrastructure projects including power generation. This should boost
the financing of new power generation capacity.
4. The report
of the Task Force on Tariff, earlier submitted to the government, might
be shared with the stakeholders for information. Moreover, information
regarding the working of existing utilities such as annual audited
accounts, plant-wise electricity generated by the IPPs/others and sold
to NTDC, power sold to various distribution companies, etc might be
provided to the general public for information through the PPIB/NEPRA.
Further, the information already being provide by the PPIB and NEPRA
through their respective websites might be improved and made
5. For the
consumers, electricity tariff is what they pay for the actual
electricity used. For the utility receiving the payment from the
consumers, the tariff is what is left with it after remitting to the
government various taxes and royalty collected as part of the
electricity bills. To be profitable, the utility must be left with some
amount after meeting administration expenses, cost of electricity
purchased or generated, high losses in transmission and distribution,
depreciation on the power system and the financing cost payable to the
creditors. Technical or administrative inefficiencies in any part of the
power system and/or the capitalization structure of the companies and
their operational/contractual arrangements with counter parties might
further increase the cost and consequently reduce the profits or result
into losses. All these matters might be carefully reviewed followed by
corrective measures for a vibrant and reliable power system in Pakistan.