PUBLIC PRIVATE PARTNERSHIP FOR DEVELOPING POWER SECTOR

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Mar 23 - 29, 2009

Government has envisaged public private partnership in the energy sector as a mode to overcome the challenges of power shortfall. It has undertaken the relation with private sector having current contribution of 30 percent in total power generation to reintroduce growth in the economy. The main propellant of this relation or attraction to induce investments from private sector is loosing vigour since energy demand and supply shortfall is posing a serious threat to progress of industrial working and economic activities.

Without availability of adequate gas and electricity supply, industries incur high cost of doing business and contribute minimally in economic building process. The power outage greatly affects productivity of which more importantly unemployment is an inseparable aftermath. Production slowdown gives way to layoffs. A forecast by National Transmission and Dispatch Company revealed that the national demand of power would stay at 8.5 percent and growth at 7.2 percent per annum until 2010. The need of integrated energy development programme is being felt as never before therefore as provision of energy in conformity with the energy demand in the country is not only vital for taking advantage of industrial working in developing sustainable economic growth but it is important to carry forward present and future developments related to infrastructure and modern agrarian sector.

INTEGRATED ENERGY DEVELOPMENT PROGRAMME

The integrated energy development programme is gaining importance also at this time because power crisis is rendering direct loses to competitive position of local trade and industry in the global market and igniting the decline in industrial growth, which for large scale manufacturing fell by 5.35 percent in July-JanFY09 over comparable period last fiscal.

Earlier, the scope of public private partnership programme was limited to only thermal power generation, but it is now expanding to renewable energy as well. However, no positive outcome due to this extension has yet appeared. The inconsequential tariff negotiation between government and private parties has been causing delay, increasing cost of project and non-operational costs of renewable energy projects. Without utilization of energy resources other than conventional ones, it is inevitably difficult to meet burgeoning demands of energy in the country.

Government needs a large volume of investments for energy production and its distribution. From private sector, inflows of investment will break the oligopolies of public sector power companies that have not performed in line with the financial inputs they are provided with. In power generation, Wapda and KESC have dominant market shares. Wapda rules over 59.6 percent of the total national electricity production and is main supplier to 88 percent of power consumers in the country, according to last economic survey. By end of last fiscal year, gross generation capacity of Wapda, hydel, thermal, IPPs, nuclear, and KESC was approximately19,500 mega watt.

CONSUMPTION OF POWER BY CONSUMERS

Presently, consumption of power by domestic consumers is not at a satisfactory level. It is relevant to note that a large number of consumers have access to electricity but volume of electricity per household per month is too low. Per capita electricity consumption of 402 kwh is less than world's average of 2,516 kwh as per the estimate by ministry of power. However, domestic consumption was around 45.9 percent as opposed to industrial 28.2 percent, commercial 7.6 percent, agriculture 11.5 percent, and public lighting 0.57 percent during financial 2007-08, says the economic survey. As meeting power demands is essential for the economy, managing energy consumption is important.

Non-efficient energy means high cost of production. For example, Pakistan steel mill consumes twice the energy world's average for making steels, according to a government report. Pakistan energy mix has not proportionally diversified to various energy resources over a period and composes of 50 percent natural gas, 30 percent oil, 12.7 percent hydroelectricity, 6.5 percent coal, and 0.8 percent nuclear. Because of higher dependence over gas-based power generation, gas reserves are rapidly depleting and demanding shift in direction towards wind, solar, bio fuel alternatives for power generation in mid term. Iran or any other transnational gas pipeline projects will have consequences in long term.

Government foresees required investment of $150 billion for power sector by 2050. An average annual $2 billion was planned investment by the government. At time, when government is facing budget deficit, private investors can fulfil the big appetite of money of energy sector. According to the ministry of power, in next three years (FY09-11) there would be $4,026 million expected investments in independent power production (IPP) in the country. Eighteen different IPPs including six wind power projects that would commence operation by 2010 in Sindh and Hubco would start commercial operations during the timeframe. Given the huge requirement of financial resources in energy sector, World Bank and ADB have come forward to lend technical assistances, analytical and project preparatory assistance to Pakistan. Presently, ADB is supporting four different kinds of energy projects in Pakistan, which include 50 MW wind power IPP in Southern Sindh; hydroelectricity IPP known as Rajdhani power project; LNG project for supplying gas to Sui Southern Gas Company distribution network; and Landhi cattle colony bio fuel project with a cost of $100 million that involves converting of dung of 400,000 cows into 25MW electricity, 2,000tpd of fertilizer, and 1.1 mtpa of carbon emission credits.

In the wake of power crisis, public private partnership can become a driving force to develop energy sector of the country. It will create financial resources needed to build an integrated energy sector and reduce power demand-supply gap in medium term. It will also give a thrust to exploration of local energy resources.