IPPs with generating capacity of 1200mw for Karachi soon

July 28 - Aug 03, 2003

The constant hue and cry raised by different segments of the society including trade and industry as well as the domestic consumers against chronic problem of electricity shortage, the government has finally decided to generation of about 1200 MW for Karachi.

Out of the proposed addition of 1200 MW, the government has already allowed an expansion of 120MW to Tapal Energy currently producing 126MW in Karachi.

Besides permission to Tapal Energy, the government has also allowed the Defence Housing Authority to set up a unit of 80MW.

Actually, for generating bulk of the required power, the Private Power Infrastructure Board (PPIB) has indicated to allow setting up three IPPs of 300MW each. Though it's a delayed decision, yet it is always better to be late then never. It is a timely decision to set up new power generating units in Karachi because the growing demand for power at the rate of around 4 per cent may add to the problem if the supply line was not improved immediately.

It is high time to point out that these new IPPs located in the licensed area of Karachi Electric Supply Corporation (KESC) should not be thermal based units in any case as the consumers already paying the unbearable cost of the faulty decisions of the governments in the past.

Instead of thermal, the new units should be either on coal-fired or gas-fired system. The economy was already paying at least one billion-dollar a year for import of furnace oil to run the thermal based power generating units. Setting up of more thermal based IPPs mean that the oil bill may further go up than the current amount of $3 billion a year.

The World Bank has recommended that for the development of energy sector in Pakistan there is a need for enhancing the full-scale utilization of natural gas in the country. The bank has demanded unlocking the full utilization of the natural gas because Pakistan required more gas to overcome its energy needs and to minimize furnace oil import bill by converting the local industries from furnace oil to gas.

The World Bank has asked for the withdrawal of subsidy on the provision of gas to the consumers. Subsidy given to domestic consumers was being withdrawn over a period of three years. However, a fixed 40 per cent subsidy to the low income group with monthly consumption below 100 cubic meters would continue. It may be mentioned that 40 per cent of the 3.5 million consumers would not be affected by the withdrawal of the subsidy on gas.

In this respect, the Asian Development Bank (ADB) has extended $200 million technical assistance for the Public Private Infrastructure Financing Facility in the Oil and Gas sector to the Ministry of Petroleum and Natural Resources.

The main object of this multimillion-dollar technical assistance is to help developing infrastructure through private sector involvement. This will promote economic growth as well as help reducing poverty in Pakistan. Traditionally, energy sector has been the domain for public sector investment, exhausting the scarce public resource against other competing demands. The absence of private sector greatly hampered infrastructure development that leading to slower economic growth.

This is one of the unique programs in the oil and gas history of Pakistan in which ADB would provide a facility of $200 million with a grant of $400,000. The remaining amount of the $200 million package would be provided in the form of technical assistance and soft term loan.

Experts in the power sector are of the view that there are various options to adopt, regarding fuel to run these new units. Besides developing the existing coal reserves at Lakhra and Thar coalfields, Pakistan can import coal from neighboring India or they should be gas-fired units. The Turkmenistan gas pipeline project has already gone to its advance stage and by the time these units would be ready to go for power generation, the gap pipeline project would simultaneously ready to supply fuel to the new units.

Currently, Karachi the largest population and the biggest industrial city of Pakistan is experiencing power breakdowns, load-shedding, power fluctuation problems which have become an every day feature.

As a result of power crisis, not only the domestic consumers were facing hardships in the hot and humid summer but also the industry was unable to meet its export commitments. This entire situation has earned a bad name for KESC, although it's not solely responsible for the power-related problems.

It is a fact that most of the existing power generating units of KESC have already come to their age and credit goes to the KESC engineers for running these outlived units. It is not the shortage of power but the KESC was entangled with complexities of the issues like dilapidated distribution and transmission systems which also need replacement of various grid stations, transformers and transmission lines.

In order to go for rehabilitation of the system, the KESC management had requested the government at least one year ago for a grant of Rs13 billion required for improvement in the systems, however, the KESC has been given only Rs1 billion which obviously not sufficient to deliver the goods.