CAPTIVE POWER -PLANTS IMPERATIVE TO REDRESS THE INDUSTRIAL WOES
TARIQ AHMED SAEEDI
May 30 - June 5, 2011
Uncertain about the electricity supply, inconsistency of which is asphyxiating the public life and specially "paralysing""" the industrial production, medium and large sized companies are relying on the in-house power production. But, since power generation from the thermal sources (gas and oil) on individual basis incur heavy costs on them, not all the enterprises that include small ones can enjoy the full-load, round the clock, electricity supply from the captive power plants.
Normally, large-scale organizations carry captive power production to fulfil energy needs of their operations and supply surplus electricity to the national grid. Private and public sector enterprises are successfully running their captive power plants run on thermal sources. At least, they are not worried of uninterrupted supply due to the independent production. The production is on large scale and obviously requires heavy capital investments. Currently, captive power plants (CPPs) are being operated nationwide.
In 2009-10, Karachi electric supply company recorded 272 megawatts captive power flowing in its system. All plants are thermal fired. Pakistan Steel Mills boasts of the biggest captive power plant in the city with 110 megawatts (MW) production capacity that is sufficient to meet its industrial and residential requirements. The steel mills is followed by DHA Cogen that has 94 MW installed capacity, Aggreko rental (50MW), International Industries (19 MW), Engro Polymer (18 MW), Al-Abbas (coal-combusted) 15 MW, Anoud Power (12 MW), and IIL-4 (four MW). The city's private power utility manager purchases surplus units from the CPPs. Installed generation capacity of private sector was 46 per cent (9,939 MW) of national total capacity of 21,593 MW, according to the national electric power regulatory authority (Nepra) report 2009-10.
Electricity load shedding is taking high toll on the economic and social lives of people. While it is hobbling the industrial productivity, it is feared that export oriented companies with drawn-out export orders would completely shift their operations to Bangladesh and neighbouring countries including India that have relatively lesser cost of productions. India and Bangladesh have electricity tariffs approximately 40 and 60 per cent lowest than that in Pakistan. Consistent rise in the electricity tariffs is also encouraging local and foreign companies to relocate operations from Pakistan.
The situation unquestionably calls for self-help measures from the local industries. Electricity load shedding has assumed a dangerous proportion in Karachi that is nucleus of the national economy. Industrial slowdown in the city reflects visibly in the economic activities around the country. KESC's ritualistic outages are adversely affecting the industrial production in the financial hub.
Since power sector is capital intensive, group investment by the private sector can redress the woes afflicted on all economic sectors by electricity load shedding.
Six major industrial areas in Karachi have more than 11,000 operational companies. Korangi industrial area claims to have accommodated 4,500 companies with Rs270 million daily tax revenue contribution, followed by SITE Karachi with 3,000 units, North Karachi with 2,500 small and medium units and tax contribution of Rs9 billion per annum, and Federal B Area with 2000 units and annual tax contribution of Rs8.5 billion. Landhi and SITE North Karachi also cover wide range of industrial concerns. They majorly depend on KESC's electricity. Many small and medium companies employing a large workforce are on the verge of collapse due to the energy shortages.
Demand and supply gap is a common phenomenon in every aspect of Pakistan's economy. Electricity shortfall moves beyond the mark of 6,000 megawatts in peak hours during summer across the country. This time round weather comes alongside perhaps the worst energy crisis in the country's history. The shortage is not ordinary and the absent volume is sufficient to fulfil the total energy requirements of the two large cities in the country. Unluckily, the demand of electricity is running much ahead of local production. Some statistics can put a weight in the argument that inaptness in successions dragged the energy sector to its present state where it finds itself unable to meet the local energy needs and it is producing pricey, inflation spiking, outputs.
During 2003 to 2008, around 5.2 million domestic and 45,000 industrial consumers had been connected to the national grid whereas a little over 800 megawatts were added in this period, said the Nepra's report. It is obvious that uncontrolled population is also a major cause of such a huge demand and supply gap.
Prices of oil that is one of the prime fuels for power generation are highly volatile. Since Pakistan imports oil to meet majority of the country's local needs of transportation and power generation, the impact of high oil prices in international market is seen in the electricity tariffs. Reliance on imported furnace oil is also increasing owing to fast depletion of gas reserves, and particularly reduced power generation through gas from 29 per cent in 2008-09 to 25 per cent in 2009-10.
Ironically, weird change in Pakistan's energy mix over the last 25 years would make outsiders believe that the country is economically sound and therefore not weaning off thermal sources-prices of which have been continuously rising-to generate electricity. In fact, the reliance on oil and gas has been increasing during these years. Until last year, the hydropower plants had installed capacity of 6,555 megawatts, 30.4 per cent of the energy mix whereas thermal installed capacity accounted for 68 per cent that was about 14,577 megawatts. The figure was 51 per cent (2,897 megawatts) for hydel and 46 per cent (2,580 megawatts) for thermal in 1985.
Nepra has reduced fees for generation, transmission and distribution licenses to encourage private investments in the power projects. Last reduction in fees was of 60 per cent in May 2010. The time is ripe for the private sector to invest in the power projects. Government should encourage private companies to make group investments in the captive power production. Foreign investors are taking serious interest in the power sector that will prove profitable in the days to come. Korean Lotte group that recently acquired Pure Terephthalic Acid (PTA) plant of ICI Pakistan invested $50 million in captive power generation.