1 - 7, 2010

Pakistan Electric Power Company (Pepco) is entangled into the web of vicious cycle of inter-corporate circular debts, which once again have increased to Rs86 billion, on the back of financial crunch paying interest on the stuck dues to the IPPs instead of paying the actual dues, it is learnt reliably.

It may be recalled that the government had issued two power bonds (Term Finance Certificates) worth Rs80 billion in March 2009, and another of Rs.82 billion in September of the same year to clear pile-up dues of PSO and Rs70 billion to Hubco in two phases and Rs31 billion and Rs23 billion to Kapco under the strong recommendations of IMF. However that cleared slate could not remain clear as the nasty cost of electricity which not only has become a nightmare for the consumers is also giving tough times to the power producers as well as the distributing utility companies especially Wapda.

The consumers in general and industry in particular besides paying exorbitant price of electricity are also experiencing hours-long load shedding every day despite the fact that Pakistan is richer than Iran and Saudi Arabia in terms of energy as the coal deposits of the country-the cheapest fuel for power generation- is enough to produce 100,000 megawatt for more than 30 years.


The coal deposits in Sindh estimated at 186 billion metric tons with best heating value can produce 2000 trillion cubic feet of gas which is more than the entire proven oil capacity of Iran and Saudi Arabia and can cater to the entire energy need of the country if put to productive use.

It may not be out of place to mention that 80 percent power in Australia is coal based, in China 78 percent, 70 percent in India, and 50 per cent in the United States while yet another coal based power plant of 22000 megawatt is in the pipeline in the United States. But the developing countries including Pakistan are always discouraged for opting coal based power generation on the pretext of global warming. Why this reason is only valid for the weak economies?

There is however a positive development in Sindh where the provincial government has gone into an agreement with Engro Power with 40 & 60 percent partnership for setting up a power plant of 1000 megawatt near coal deposits of Thar. The provincial government this time looks resolved to go ahead on fast track basis for completion of this power project. This project will open doors for many more power projects and hopefully bridge the gap between demand and supply in view of the fast growing power demand in Pakistan.


The skilled textile workers, associated with power looms sector, are migrating to Bangladesh on the back of extremely depressed situation due to high cost of energy compelling 70 percent power looms to close down their businesses in the country.

In fact the exorbitant increase in electricity and petroleum products has a paralyzing effect on the industries unable to compete in the market in the wake of ever increasing cost of production. The Value Added Sector (VAS) and All Pakistan Power Looms Association (APPLA) said that a total of 250 textile factories and as many as 70 percent power looms have been closed during last two years due to constant rise in the tariffs of gas, petroleum products and electricity tariffs.

It is interesting to note that the manufacturing sector is focusing more on import of finished products rather than taking interest in the local production due to exorbitant increase in input cost. This is self evident in rising imports of CBUs by the automobile companies, which would ultimately involve outflow of hard earned foreign exchange from the country.

The cement industry that was on a production enhancement spree, emboldened by a powerful resort to cartelization, lower coal prices, and lucrative exports due to massive demand generated by Middle East, Africa, and even India, is now under dark clouds. Six cement mills have ceased production due to economies of scale, lower foreign as well as domestic demand, and break-up of the cartel orchestrated by the Competition Commission of Pakistan. At the same time, state-owned enterprises have bled the government coffers dry due to dependence on government subsidies or bailouts.

Pakistan Steel, PIA, Pakistan Railways, and five or six other SOEs lost over Rs 200 billion annually. This hemorrhage is always discussed but no effective measures ever undertaken. The present position is likely to continue in the future too.

It may be noted that the textile industry has been creating jobs up to 45 percent for several years however owing to constant inflation in the power and gas tariffs, over 250 textile factories have been closed down so far. It may be mentioned that most of the textile factories which previously used to work round the clock, have reduced working hours into a single shift for the same reasons which apparently sound a note of warning for the economic managers for taking remedial measures for the survival of the local industry.

The government is working on a fast track strategy aimed at narrow down the gap between power demand and supply estimated at around 3,500 megawatt, said Prime Minister Syed Yusuf Raza Gilani.

In his opening remarks at the inauguration of a 220 megawatt combined cycle power plant being setup by Karachi Electric Supply Company, the prime minister said that with the arrival of incoming Independent Power Plants (IPPs) and Rental Power Plants(RPPs)at least 1,737 MW of power would be made available to national grid that would be providing a much sought after relief to the people.

He said this power plant would not only give a boost to KESC's power generation output, but would also be a major source of economic development of the area particularly the industrial and commercial sector. It would be another milestone towards the electric power sufficiency of the country, a goal which is on the high priority list of this government.

Gilani congratulated KESC on successful operation of this power plant and also congratulated Abraaj Group for putting in concrete efforts to complete the project to the benefit of the consumers in Karachi.

He said KESC is the first privatised body that is part of the government's reforms programme in power generation and distribution sector. The national policy of power generation aims at eradication of load shedding by placing on ground a set of power generation options like IPPs, nuclear, hydro, and RPPs besides seeking substantial generation inputs from captive power plants.

During the calendar year 2009, we ensured commercial operations of Attock, Atlas and Nishat power generation plants adding 581 megawatts to national grid, he said. The cabinet in its meeting of January 27, 2010 had approved 8 RPPs of 1156 megawatts which are in advance stages of implementation and are keenly pursued for attaining commercial operations within the present calendar year.