LOOKING FOR ALTERNATIVES
SHABBIR H. KAZMI
Oct 24 - 30, 2011
With the commencement of winter, hydel generation will decline and reliance on thermal power plants will increase. Since generation companies operating in public sector are contributing a nominal percentage, reliance on independent power plants (IPPs) will increase. Ideally, this should have been a win-win situation for the IPPs but under the prevailing situation one does not find them a dependable source of supply, because of inadequate supply of fuel. It is feared that during this winter electricity outages may exceed 16 hours a day.
It is on record that lately Hubco and Kapco having an aggregate capacity of about 3,000MW were operating at as low as 700MW and also witnessed intermittent closure after running out of fuel. Many of the smaller IPPs expressed inability to continue generation due to liquidity crunch rendering them incapable of buying required quantity of fuel. Earlier, they have warned the government of encashment of guarantees because of failure of the Pepco to settle its liabilities.
The gravity of the crisis can be gauged from the recent sale of 140 million shares of Hubco held by Xenel Group of Saudi Arabia. One can still recall that when Hubco faced the worst during the regime of Mian Nawaz Sharif, Xenel stood strong but breach of contract by the government of Pakistan (GoP) is enough to convince any investor that he/she should disinvest to avoid the worst in near future.
Experts have been saying that the present government has completely failed in resolving the issues; rather it has complicated it by taking steps which are anti consumers. While electricity tariff has been increased persistently and substantially in the name of recovery of full cost, least attention has been paid on containing transmission and distribution (T&D) losses hovering around 40 per cent. Experts say bulk of T&D losses consist of blatant theft going on for decades with the connivance of the staff of distribution companies. They also say that any hike in electricity tariff and/or payment of subsidy cannot improve cash flow of distribution companies, unless this massive theft is contained. They are of the view that each hike in tariff provides incentive to consumers to pilfer electricity.
It is on record that Pakistan has total generation capacity (including KESC) of over 22,000MW but actual generation hovers below 15,000MW. The practice of running power plants at lower capacities, both in the public and the private sectors is proving counter productive. Running of power plants at below optimum capacity utilization adds to the cost of generation and provide the reason for another hike. Nearly half of the total electricity supply is contributed by the IPPs. With the growing dependence on IPPs, the average cost of electricity has also increased for the distribution companies.
Some of the experts have been saying that the present regime has created a reason for establishing rental power plants (RPPs) in Pakistan by creating the present crisis. It was also said that gross violation of rules and worst kind of nepotism was followed in granting permission to the most favored. One has no option but to believe this after the recovery of Rs2.5 billion from the RPPs by the Supreme Court of Pakistan. This became possible only because Faisal Saleh Hayat pleaded his case very prudently and convinced the court that advance payment was made in gross violation of the laws of the country.
Lately, when Karachi faced the worst load shedding, Governor Sindh played a major role in convincing the federal government to extend support that leads to reduction in outages. As against this, Punjab government has been accusing the federal government for the load shedding of electricity and gas but failed in taking any corrective measure at its own.
Reaching at the conclusion that present energy crisis is the outcome of blatant violation of good governance, gross inefficiencies and massive corruption finding the solutions should not pose any difficulty even for a man of average wit. The top priority should be recovery of outstanding dues and containing theft. However, utilities cannot do this alone unless both the provincial and federal governments play their due role. The deductions can be made at source and paid to utilities. For containing theft law enforcing agencies as well as the courts of law must help the utilities in catching electricity pilferers and imposing heavy penalties.
According to the sector experts, one percent T&D loss costs KESC around Rs1.5 billion and other distribution companies may also have the same relationship depending on the overall number of units distributed. Many of the critics of KESC just do not understand that its franchised area is bigger than nearly 90 members of the United Nations. Many of the areas have ethnic concentration which has never paid electricity cost in their home towns.
One fails to understand why people from certain areas must get cost free electricity. The contention that they are poor is not correct because millions of people living in Karachi also have extremely low per capita income. The point that they make any special contribution to Pakistan is also not true because every citizen no mater to what income group he/she belongs to is making a contribution. In fact, the cardinal rule is to pay for the units consumed.
With the hike in international price of crude oil, Pakistan has no option but to increase hydropower generation and exploit Thar coal potential. The government must focus on construction of 'run of the river' type hydropower projects. Pakistan certainly needs to construct mega projects to overcome shortage of electricity as well as irrigation water. Since these projects take very long, small hydel plants can help in overcoming shortage in shorter span of time.