WORK ON WAR-FOOTING NEEDED TO MEET FUTURE POWER NEEDS

Several energy analysts are of the opinion that Pakistan's energy infrastructure is the worst in Asia.

SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Nov 06 - 12, 2006

Despite tall claims and rhetoric usually made at the highest level, nothing concrete is visible on the ground to ease the worsening power shortage in the country. Pakistan's energy requirement is increasing by 10 percent for the last 5/6 years but the supply position remained almost static during this period. By now we are almost faced with a crisis on our power front.

Pakistan recently experienced a worst and longest power breakdown in history, which was mainly a result of shortage of electricity. When demand outstrips the capacity it causes a ripple effect resulting in the collapse of entire system. According to experts we will continue to live with this phenomenon unless we take drastic action on war footing to improve the power generation of the country without it the tall claim of 8 percent growth in GDP in future will only be a dream.

The power policy-2002 announced by the present government with a big fanfare and which was supposed to serve as a better replacement of the 1994 power policy has failed to deliver. No doubt generation of hydro power is a long process, but there has been a dead silence on major dams despite all earlier rhetoric. The work has not yet started even on the Diamir Bhasha dam, which was inaugurated by the President about six months back. A blanket hush has also overtaken the government about Kalabagh dam in spite of the President's assertion that misunderstandings and misconception about the reservoir have been removed. The government has been talking of importing electricity and gas but practically there has been no progress on any of the several projects. Similarly, despite huge potential alternative energy, we have been extremely slow in exploiting the potential.

Power policy 2002 failed to deliver because of two mega factors i.e. non-availability of gas and upfront tariff determined by NEPRA. As a result, sponsors of six fast track thermal power projects of 1450 MWs backed out. This proved a serious blow as it discouraged and disheartened other intending investors. Now a new short term revised policy has been prepared and approved. Minister for Water & Power Liaqat Ali Jatoi okayed the draft of energy policy, which would be submitted to the Economic Coordination Committee (ECC) of the Cabinet for approval. The ECC, which will meet under the chairmanship of Prime Minister Shaukat Aziz is expected to formally approve the policy.

The policy envisages mainstreaming of renewable energy employing small hydro, wind and solar technologies in the development plans of the country. The draft of the policy was discussed in detail and finalized during a meeting held with Liaqat Ali Jatoi in the chair. The minister briefed the newsmen that the policy offers very liberal and attractive incentives to attract investment to put Pakistan on the renewable energy map of the world. Pakistan is blessed with abundance of renewable energy potential but so far its potential has not been harnessed except for large hydroelectric projects, he added.

He said that the government has decided to use all other options to generate electricity to meet the growing demand of 10 to 12% annually. The policy is in line with the President and Prime Minister's open arm policy for inviting the investment in the country. He appreciated the role of the ministry secretary, AEDB and PPIB for preparing policy and hoped that it will go a long way in strengthening and improving power supply position of the country.

Earlier, Secretary Ministry of Water and Power Ashfaq Mahmood and Chairman AEDB Air Marshal (Retd) Shaid Hamid gave a detailed briefing on the policy and said that the policy comprises three phases - short term, medium term and long term. Giving the salient features of the policy, the secretary said that it invites investment for private sector for four categories: (a) Independent power projects (IPPs) for supplying power to grid only, (b) Captive cum grid spillover power projects (i.e. self- use and sale to utility, (c) Captive power projects (i.e. self or dedicated use) and (d) Isolated grid power projects (i.e. small, stand-alone). To encourage generation through renewable resources, small projects for self-use will not require any permission from the government and will also be able to sell surplus power to DISCOS under the policy.

NTDC and Central Power Purchase agency will make mandatory purchase of electricity from Renewable Energy Resources projects. The policy will allow an investor to avail the facility of delivering power on the existing infrastructure and receiving equivalent power for use at location of its own choice. The small renewable energy projects will not require tariff determination from NEPRA.

It has been allowed that wind and solar projects irrespective of size of plants (even more than 50 MW) will be dealt by AEDB. Giving the details of the financial incentives to the investors, he said that among other incentives there will be no custom duty or sales tax for machinery equipment and spares meant for the initial installation or for BMR or expansion after commissioning of projects for power generation utilization from renewable energy resources. Exemption has been allowed from income tax, including turnover rate tax and withholding tax on imports of machinery and equipment.

The investor is allowed to issue corporate registered bonds. Permission to issue shares has also been granted under the policy at discounted prices to enable venture capitalists to be provided higher rates of return proportionate to the risk. Non-residents have been allowed to purchase securities issued by Pakistani companies without the State Bank of Pakistan's permission, subject to prescribed rules and regulations.

The country is fast heading towards electricity crisis in the coming years. Experts had warned last year that the country may be facing a shortage of about 1000 MW by end 2006 which may rise to 5000 MW by 2010 and 10,000 MW by 2020. This basically translates into load-shedding on a large scale in the years to come.

In fact, foreign direct investment of over $5 billion is urgently needed to rescue local industries from acute shortage of electricity supply. Demand supply position between the years 2007 to 2010 has been estimated as under.

YEAR

DEMAND

SUPPLY

SHORTAGE

2007

16,548

15,091

1,457

2008

17,689

15,055

2,634

2009

19,080

15,055

4,025

2010

20,584

15,055

5,529

Demand for power has increased faster lately due to better business conditions and improved economic activities 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.

The per capita consumption of energy in Pakistan is only 14 mmbtu. It is as high as 165 mmbtu in UK and 92 mmbtu in Malaysia, 33 mmbtu in China and 13 mmbtu in India. The per capital energy consumption reflects the industrial advancement of a country and the above figures clearly indicate the level of development in these countries.

It is estimated that public sector accounts for almost 64 percent of the total power generation in the country, of which the share of Wapda is 50 percent, KESC 11 percent and PAEC 3 percent. In addition, IPPs are producing around 36 percent. Of the total power production, the industrial sector consumes approximately 38 percent. However, the annual energy generation growth (AEGG) rate has been scaled down from 5.3 to 4.6 percent. Moreover, several energy analysts are of the opinion that the country's energy infrastructure is the worst in Asia.

President General Pervez Musharraf in one of the meetings held recently had said that the government was pursuing an extensive programme to meet the country's growing energy needs to sustain high economic growth and fast paced industrialization. Chairing a high-level meeting, also attended by Prime Minister Shaukat Aziz to review the power sector plans, he said that the nation had to tap all sources of energy generation to cater to its demand.

PERFORMANCE OF POWER WING
(CONSOLIDATED)

PERFORMANCE INDICATOR

FY 2003

FY 2004

FY 2005

TARGET
FY 2006

ACHIEVEMENT Jul 05-Mar 06

REVENUE (Rs. in billion)

216

232
(7.4%inc)

246
(6.0%inc)

252

182
(10.4% inc)

T & D LOSSES (%age)

24.4%

23.9%
(0.5%dec)

23.2%
(0.7%dec)

21.9%

21.4%
(1.3% dec)

GENERATION (GWh)

64,038

69,091
(7.9%inc)

73506
(6.4%inc)

77651

58928
(11% inc)

 

JUN 2003

JUN 2004

JUN 2005

TARGET
FY 2006

AS ON
31 MAR 2006

CONSUMERS (million)

13.3

14
(5.3%inc)

14.9
(6.4%inc)

0.9

15.63

VILLAGES ELECTRIFIED
(yearly addition)

73,829
(2246)

81,022
(7193)

90,489
(9467)

103489
(13000)

99617
(9128)

HT (11 kV) Lines (km)

196139

201391

212929

9600

220144

LT (0.4 kV) Lines (km)

133771

137831

149885

5400

153966

Source: Energy Security Plan

It's encouraging that President Musharraf and Prime Minister Shaukat Aziz have been focusing on the country's growing energy needs periodically to keep the authorities concerned on their toes for boosting power production. It manifests their cognizance of the significance of long drawn planning in keeping with the imperatives of the growing economies. Interestingly, Pakistan has the options of hydel, thermal, nuclear and coal based modes of energy generation. Hydel and nuclear are, however, the cheaper sources of energy production for Pakistan. Nuclear energy is of course cheaper, cleaner and safer and that's why Europe has opted for it. Pakistan is also bending on nuclear energy as is evident from reports about selection of six sites for installation of more power plants to increase the country's generation capacity to 8,800 MW nuclear power by 2030. The Chinese help in this regard is certainly a matter of satisfaction. What's, however, agitating is that there is complete silence about the hydel power production plans as well as the construction of major water reservoirs. Despite the fact that the ground breaking ceremony of Bhasha dam was performed by President Musharraf months ago the pace of work on this power project is rather too slow. A blanket hush has also overtaken the government about Kalabah dam in spite of the President's assertions that misunderstandings and misperceptions about the reservoir have since been removed. It is firmly believed that President Musharraf alone can build the Kalabagh dam in the objective political conditions in the country. Itís, therefore, incumbent upon the President and Prime Minister not only to put up hard work for the good of the country, but also let it be known to the people. These are the mega projects with which the nation's destiny is linked. The contrived silence is simply enigmatic.

POWER SECTOR IN PAKISTAN

FUEL/TECHNOLOGY

INSTALLED CAPACITY ON 30-6-2005

SHARE

ELECTRICITY GENERATION DURING YEAR 2004-05

MW

Percentage

Million kWh

Hydro

6,494

30.0

25,671

Oil/Gas

12,273

66.6

56,988*

Coal

150

0.2

175

Nuclear

425

3.3

2,795

Total

19,342

100

85,629

Source: HDIP (2005)