Managing the power crisis
Malik M Ashraf
When the present government assumed office , the country was confronted
with a grave power crisis due to a deficit of 3500 MW ; a legacy of the
criminal neglect of the previous governments to show sensitivity to the
growing need for power and the need to enhance power generating capacity
in the country. There was a massive power load shedding across the
country, factories and plants were closing down, manufacturing
businesses and exports were in the nose-dive mode triggering wide spread
unemployment. There were riots on the streets, trains and public
property were being burnt by the agitated masses.
The crisis needed to be tackled on priority basis. The PPP regime was
faced with a similar kind of situation, as was the case when Mohtarma
Benazir Bhutto was installed as Prime Minister in 1993. At that time,
there was a deficit of 2000 MW of electricity causing forced shutdowns.
Responding to the gravity of the situation, the government chalked out a
strategy to involve the Independent Power Producers and a Private Power
and Infrastructure Board was created to act as a “one window” facility
for the prospective investors in the private power sector. It was a mega
success story whereby renowned international investors came to Pakistan
with a foreign direct investment of US $ 3 billion , resulting in the
production of 3000 MW of electricity. Pakistan had started generating
surplus electricity and at one time India was negotiating with Pakistan
for import of electricity from Pakistan . In the following 12 years
after the end of PPP government not a single kilowatt of electricity was
added to the system. A witch-hunt against IPPS in the late 1990s and
subsequent delays in their payments by WAPDA must caused the investor to
say “ Thank Sir , no more in Pakistan “
The priority which the present government accorded to tiding over the
power crisis is quite evident from the fact that immediately after the
formation of the present government in March 2008, the Prime Minister in
his first address to the parliament after being elected unanimously
listed tackling power crisis as one of his top priorities .
Acknowledging the seriousness of the situation he also spelled out the
contours of the policy initiatives to be put in place to overcome power
shortage , including the installation of new power plants on emergency
basis to generate 2200 MW electricity within a year in addition to
generating 5000 MW electricity through Thar Coal Project , to be
eventually enhanced to 20,000 MW.
In pursuance of the vision of the Prime Minister and to meet the short
term requirements of the country , the government has taken a very bold
decision to induct rental power plants which can be successfully set up
within 6-8 months as against IPPs time span of 3-4 years. Despite some
criticism by certain circles as to the costs involved in comparison to
the IPPs ,it is the best option available under the circumstances and
even on the cost side there is not much difference between the two. The
government had a choice either to provide power or allow 18-hour
shutdown. A popular government like PPP could not allow the industry and
the masses to continue suffering from the debilitating effects of the
energy crisis and went for the first option. It is not something out of
this world. Rental power plants have been set in UK , India , Bangladesh
, Kuwait , Sri Lanka , Turkey , UAE ,Saudi Arabia , Iraq and Palestine.
The greatest advantage of this step is that no capital investment by the
government of Pakistan is involved in the rental power projects. The
amount of US $ 2 billion required to set up rental plants has been
mobilized by the private sector and without any guarantee or obligations
of the government of Pakistan to the lenders for repayment in case of
rental sponsors default . The government of Pakistan will provide
guarantee only to cover the event of default by PEPCO/GENCO, the
state-owned entities buying the rental power .The government is
therefore paying only for the electricity supplied. It has no liability
to pay for setting up of the plants and it also takes no responsibility
for loans taken by rental sponsors. In these times of financial crunch
and acute shortage of power , the rental power plants are the best
available solution to avert the crisis .
Apart from the setting up rental power plants , the government as part
of its fast track policy has also successfully set up three power
generations plants of 200 MW was inaugurated by the Prime Minister at
Kasur on 7th November ,2009. The government has also devised a strategy
to augment the power generation of the existing installed capacity and
to prevent line losses. All the institutions related to power sector in
Pakistan including PPPIB, PEPCP ,WAPDA , AEDB and NEPRA are also working
together with great cohesion to optimize production and streamline the
system. Further keeping in view the long-term energy needs of the
country, the government despite opposition from some foreign capitals is
going ahead with the multi-billion dollar Iran-Pakistan Gas Pipe Line
Project and has initiated the process of arranging finances to the tune
of US $1.245 required for laying 800 Kms long line pipe line from
Pak-Iran border to Nawab Shah. Pakistan will also import 1.05 billion
cubic feet of gas per day from Iran at 78 percent of crude oil parity
price. Pakistan and Iran have already signed Gas Sales Agreement (GSPA)
for importing 750 million cubic feet gas per day which will be used to
generate 4500 MW of electricity and would be a cheaper alternative to
the presently expensive imported furnace oil used in the existing
thermal power houses. Another 250 million cubic feet of Gas per day is
also envisaged to the purchased for development projects at Gawadar in
Balochistan. Considering the magnitude and strategic nature of the Gas
Line Project ,the government has adopted a private-public partnership
approach for financing the project with debt equity ratio of 70: 30
under which the government of Pakistan will provide 51 per cent equity.
This equity would be injected upfront through selected Public Sector
Entities like OGDCL, Pakistan Petroleum Limited , Government Holding
Private Limited, Employees Old Age Benefits Institution and State Life
Insurance Corporation. The debt will be sourced from the market backed
by the government guarantees for transportation tariff. Any gap in
raising the required debt from the market , the funds will be ensured
from PDSP allocations.
As is evident, the government is exploring all possible avenues to
surmount the difficulties arising out of the power shortage and measures
have been put in place on the short term as well as on long term basis
not only to eliminate the deficit but also to cater for the ever growing
power demand in the future. The efforts of the government in regards to
the load management , augmentation of the existing power generation
capacity and the installation of new projects have undoubtedly eased the
situation and the power cuts are not as severe as they were at the time
when the PPP came into power. One thing needed to be remembered is that
there are no quick-fix solutions available to handle the crisis like the
one we are facing in the power sector. The government has shown
unwavering commitment—— despite unenviable economic conditions inherited
by it—— in dealing with this snow-balling problem and laid a firm
foundation for building a sustainable power generating infrastructure in
the country. |
