POWER POLICY 2002
It is the Power Policy 2002 which received the overwhelming response
By AMANULLAH BASHAR
Apr 12 - 18, 2004
Despite being expensive from consumer's point of view, the power sector continues to be the most attractive area for the investors in Pakistan which reflected in 33 applications for generating about 6000MW gas-based projects at a cost of $5 billion in Pakistan.
It is the Power Policy 2002 which received the overwhelming response from the investors mostly by the international players in power generation mainly because of attractive incentives, exemption from taxes with guaranteed purchase and sustainable fuel supply agreements.
Electricity constitutes one of the most important components of infrastructure and plays a key role in national growth and development.
With only about half of nearly 140 million population having access to electricity, a huge population base provides an ideal opportunity for expansion of electricity generation. The growing pace of urbanization and industrialization also puts a premium on demand for electricity.
Demands for augmenting the power infrastructure, unsatisfactory performance of public sector entities, ever-squeezing budgets in the public sector, the need to make the tariff free from subsidies and cross-subsidies and reflect market prices etc; provide motivation for resource mobilization, improving efficiency through involvement of the private sector, to reduce the burden on budgetary resource caused by ailing enterprises and more importantly, to meet consumer expectations within affordable limits of tariff.
Although reform of the power sector through restructuring and deregulation is high on the agenda, yet practical and concrete steps in this direction are highly desirable at a much faster pace. For instance, using natural gas as an alternative fuel for power generation by replacing furnace oil is the policy of the government for over a last decade. Since conversion of major generating capacity on gas in KESC system and a sizeable portion of WAPDA indicate that the existing gas resources would not be sufficient to meet increasing demand of gas consumption, hence import of gas to meet the demand becomes unavoidable in near future. Practically speaking, the much talked about gas pipeline projects from Turkmenistan, Iran or Qatar are still on papers. One of the leading power producer in the private sector told PAGE that unless sustainable supply of gas to the power producers was ensured, large scale investment in the power sector would remain unpredictable despite attractive incentives offered by the power policy in Pakistan.
The transformation of the power sector into a privatized, competitive electricity industry will be an evolutionary process over a period of time. Initial steps during the transition period will include active solicitation of offers to build new generating plants, selling power under contracts initially to public sector utilities that can later be assigned to privatized distribution companies.
Presently, the combined generation capacity available in the public and private sector is sufficient to meet the future power demand for a couple of years, however, the growing demand for electricity calls for augmentation in generation capacity of the power sector either through private or public sector investment. In view of the long lead-time required to bring new power plants on line, particularly those based on indigenous resources i.e. hydel, coal and gas. Hence, situation calls that work on new power projects has to be started forthwith.
WAPDA has prepared "HYDROPOWER Development Plan-Vision 2025 which suggests a plan to meet the upcoming deficits through additional power generation. The plan was further updated and a consolidated list of potential projects to be implemented in the short, medium and long term has been prepared. According to official assessment, Pakistan would require 34885MW of additional power during next 20 years.
The acute power shortage in Pakistan's largest industry and commercial hub, however, strongly contradicts the official version that the existing power generation capacity is sufficient for next couple of years. The ground reality is that the city of Karachi was facing a shortfall of over 1000MW for the last couple of years. KESC which is responsible to provide power in Karachi is living on borrowed power and imports about 600mw from WAPDA which is an unsustainable source of supply. Consequently, the industrial, commercial and the domestic consumers have to experience the torture of breakdowns, load shedding, and fluctuations in the scorching heat of the summer every year. The cap on increasing generating capacity and recruitment of staff imposed by the government in the KESC system has virtually added agonies of the consumers in this city. Actually the government had a plan to leave further investment in KESC system to the forthcoming buyer from the private sector. However, since KESC has become a bundle of problems during last decade, the privatization commission failed to find a suitable buyer for this problematic public sector entity. Realizing the situation, the government has decided to investment some money to improve the generation, transmission and distribution system for which an allocation of Rs13 billion has been made during next four years. On the other hand four international buyers have also expressed their willingness to buy KESC. Whether KESC goes into the private hands or remains in the public domain, the consumers who pay the exorbitant price of interrupted electricity deserve relief at the earliest.