REVOLUTION IN POWER SECTOR NEEDED
LONG-TERM INTEGRATED POWER POLICY WILL OVERCOME ELECTRICITY CRISIS.
Nov 29 - Dec 5, 2010
With the focus on indigenous resources to overcome energy shortages for sustainable economic growth, Pakistan needs to add a power generation capacity of about 20,000MW in next 10 years.
Experts are of the considered view that there is no short-term solution to Pakistan's power sector crisis and the country will have to focus on multiple options to get out of it under a long-term integrated policy.
They said the proposed policy would include overcoming circular debt, immediate import of gas and utilisation of Thar coal for power generation, and increased reliance on hydropower. Apart from this, the government would have to ensure better management, if a way out of the worrisome situation is desired.
Describing the power scenario in coming years as "scary," the experts projected that the gap between supply and demand may go up to 13651 MW by 2020 if remedial measures were not taken in time. According to them, alternative energy is not a predominant source though it will supplement.
On the other hand, energy sector stakeholders are critical of the government's inability to introduce efficiency in the power sector and make maximum and cost-effective use of existing generation capacity. They have also raised questions about uneconomic fuel mix and failure to recover power bills.
They pointed out that foreign investments in power sector had been almost non-existent over the last few years. "The government would have to improve efficiency in the power distribution, check power pilferage, reduce line losses, and improve efficiencies through latest technologies and better governance," they said.
Although, commercial banks extended more than Rs500 billion loans to the power sector project financing, fixed investment and working capital, but the poor credit worthiness of the sector was a major bottleneck to attract foreign investment.
An annual report of the National Electric Power Regulatory Authority (Nepra) said the overall global economic meltdown had affected power industry and slowed down the completion of projects. Nepra said that the generation capacity needed to be supplemented on a war footing to meet growing electricity requirement.
"Energy is a disappointing story. There is no clear strategy there is hardly any investment in this sector," analysts said. Financial constraints and security fears are also major hurdles in attracting investment in energy.
Sources in the Pakistan Electric Power Company (Pepco) said that already, the government has initiated wide ranging reforms in the energy sector that are aimed at increasing power generation at affordable prices. These reforms involve the entire energy chain including power generation, its distribution, and transmission.
As a first step, the government has established a high-powered steering committee. Headed by minister for water and power Raja Pervez Ashraf, it includes federal minister for finance Abdul Hafeez Sheikh, federal minister for natural resources Naveed Qamar and deputy chairman planning commission Nadeem-ul-Haq to oversee the energy sector reforms.
To move in the direction of reforms, Pepco has been entrusted with the task of managing the transition from present bureaucratic structure of the energy sector to a corporate, commercially viable, and productive entity.
According to the sources, the energy crisis started in 2006, when the demand overtook the supply. Since then, it has been gradually intensifying. The energy crisis has been affecting all sectors including domestic, industrial, agriculture and commercial, inflicting losses with socioeconomic implication both at the macro and micro levels. It is also marked by consistent power supply deficits, massive load shedding, resource constraints, as well as political interference.
The sources said the reforms are designed to achieve financial sustainability in the energy sector by recovering cost of electricity, through rationalisation of tariff, changing the present fuel and generation mix to make electricity affordable, restructuring of distribution companies and make them independent corporate entities, rehabilitation of old generation units to attain their installed capacities and their conversion from use of oil to coal as fuel.
The reforms also lay emphasis on increasing efficiency, reduction in line losses, and zero tolerance against those involved in electricity theft. All these measures would address the consistently rising electricity prices, a serious concern to the common person.
According to minister for water and power, reforms plan formulated by the government will effectively tackle the critical challenge of enormous power deficit and transforming it into major driver of the country's economic development process.
He said the government strongly believes in decentralisation. The power distribution companies are being made fully financially, administratively and technically autonomous in the phased manner.
"As we need a revolution in the power sector, we have declared that on the attainment of stability in the sector, the government will disengage from generation and distribution of electricity in the country and will encourage the private sector participation in these areas."
Raja Pervez Ashraf said the central power purchase agency is being formed and the generation companies are being made autonomous and efficient. "We have also taken steps to enhance the role of Nepra and necessary amendments will be introduced in the authority's act," he said.
He said to track the resolution of all issues pertaining to power sector reforms and achieving stability in electricity supply, experts from government and private sectors under the auspices of the World Bank, Asian Development, and Usaid charged with the responsibility of providing a comprehensive policy direction.