THE inevitable has happened. Karachi is in severe grip of power shortages and outages. The prolonged power breakdowns have adversely affected trade, economy and civic life.

As an interim measure to overcome power shortage, WAPDA has provided another 100 MW electricity to KESC. This stop gap arrangement, however, will not bring any significant relief to the millions of consumers.

First, the KESC’s transmission and distribution system, which requires major re-vamping, is not capable of taking additional load. Second, current load demand in Karachi is for another 250 MW a day, which Wapda may not be able to meet.

In 2002, it was projected that Karachi would have acute shortage of electricity, to the level of 394 MW in 2005 and 506 MW in 2006, as no new projects were under construction in the area. But the gap between supply and demand was not met. It was the result of incoherent, inconsistent and shortsighted policies of the government and belated decisions.

In July 2003, the Private Power and Infrastructure Board(PPIB) proposed setting up of two new power projects in Karachi, with cumulative capacity of 900 MW, in the first phase, based on natural gas.

One plant of 1x300 MW was to be set up in the vicinity of Gadani and another 2x300 MW near Hawksbay, for which investors were invited to present the EOIs (Expression of Interest). In all 27 investors, domestic and foreign, showed interest, and most of these investors subsequently submitted the required pre-qualification /qualification documents.

In spite of earlier indications, the government however could not, or did not, confirm availability of required natural gas on a long-term basis -an essential pre-requite for any power project.

While the ministry of petroleum and natural resources was agreeable, in principle, the concerned gas distribution company finally refused to provide natural gas from its network for these projects, on “technical-cum-financial” grounds. Valuable time of almost two years was thus lost. But gas was committed much later to other proposed projects in Karachi.

Designated as a “one window operation” for facilitation and processing of power projects in private sector, PPIB is heavily dependent on a number of departments and agencies. These include National Electric Power Regulatory Authority (NEPRA), Wapda, KESC, Sindh Coal Authority, Provincial (and Azad Jammu & Kashmir) Private Power Cells, Sui Southern Gas Company, Sui Northern Gas Pipelines Limited and oil supply companies, to quote only a few.

Though not within the purview of the KESC, it entertained, reportedly under political pressure, in July 2004, a proposal for fast-track project by GSB Technologies of the USA, along with local partners. Sometime in November 2004, however, the project was transferred to the PPIB for processing, against its wishes, as the project should have been offered for international competitive bidding according to the Power Policy 2002. The barge-mounted power project, which was envisaged as a gas-based combined cycle unit of 200 MW capacity, was to be set up at Port Qasim, Karachi.

The fast-track project was scheduled to come on stream by end April 2006. The ministry of petroleum and natural resources made firm commitment for supply of required quantity of natural gas for an initial period of five years and Sui Southern Gas Company also agreed to supply pipeline quality gas for the project from its existing network.

In spite of full facilitation, the sponsors failed to comply with the requisite procedural and legal formalities, including submission of a performance guarantee, by the deadline that was extended a number of times. For this reason, there could be no progress and the fast-track project was eventually shelved in February 2005.

To install power projects in Karachi on priority basis, the PPIB approved two projects of cumulative capacity of 300 MW in private sector, which were scheduled to start commercial operations by the year 2007. The LOI (Letter of Interest) was issued to Tapal Group (Western Electric Power project), in February 2004, for setting up a dual-fuel (natural gas and furnace oil) power project of 150 MW capacity.

Likewise, approval was accorded to Fauji Foundation for the Fauji Korangi Power project of 150 MW, in April 2004.

The two projects progressed satisfactorily, having reached the stage of negotiating tariff with NEPRA, prior to signing of Power Purchase Agreement (PPA) with the KESC. But due to on-going privatisation process of the utility corporation, it was deemed “appropriate” by the government that the new owners of the KESC should have say in the matter of tariff too.

Meanwhile, NEPRA adopted a rigid attitude towards these projects. This exercise was prolonged because of inordinate delay in finalizing sale-purchase deal for the KESC and subsequent transfer of management. The KESC privatization process had been going on since 1997 and was concluded only in November 2005.

Indeed, the Minister for Water and Power Liaquat Ali Jatoi decided in consultation with concerned government agencies, to negotiate and settle the tariff issue with project sponsors, which was later to be made part of the agreement to be signed between KESC’s buyers and the Privatisation Commission. This, however, did not yield positive results as sponsors took inflexible stand on tariff issue, or perhaps, they were apprehensive of the KESC buyers not honouring the government’s pre-privatisation commitment.

In pre-privatisation period, the KESC was not allowed to undertake required capacity additions, as per government policy, despite the fact that its existing installed capacity de-rated over a period of years. Sometime in August 2004, the UAE government had gifted a second-hand gas-based thermal power plant, with a cumulative capacity of 512 MW. These units were initially to be installed in the Punjab, but aware of a brewing power crisis in Karachi, the minister for water and power decided that part of the plant consisting of gas turbines of 432 MW capacity would be installed in Karachi.

Again, no appreciable progress could be attained. The plant, which requires major overhauling and refurbishing, is yet to be transported and relocated to the sites in Pakistan, which remains the responsibility of WAPDA.

In a similar move, the minister revived the KESC plans to undertake extension of Korangi thermal power station, by adding another 350 MW combined cycle power plant, for which project feasibility study was conducted many years ago, but project was dropped in the wake of KESC’s on-going privatisation.

While in Japan in August 2005 with the Prime Minister, Liaqat Jatoi had asked for the Japanese financing for the power project costing about $240 million. The Japanese government committed to restore a loan of $420 million. If the contract for project construction was awarded on international competitive basis, it would have taken five years for plant to be operational.

The minister took initiative to consider placing order on a Japanese company on negotiations basis that would have allowed commissioning of power plant by end 2006. The proposal was killed however, and no one heard any more about the Korangi extension project or the committed Japanese loan.

The outcome of the failure to set up any project was that all stakeholders suffer— the Karachi consumers are the worst hit. Under the given conditions, demand load in future too will remain much higher than firm supply from overall KESC system.

The new management of KESC has refused to purchase electricity from the two projects of Tapal Group and Fauji Foundation, and instead now plans to construct its own power generating units. Consequently, the two projects need to be re-located, outside the KESC system, if still considered feasible by the sponsors.

The KESC now promises to add 45 MW power generation within three months, another 276 MW by May 2007 and additional 500 MW by August 2007. This is not practically possible in the given period by any standards, whatever emergency measures are adopted. In any case, the useful life of the KESC’s existing power plants have depreciated by nearly 60 per cent, and the proposed additional power generation would not cope with the growing demand.

Many of KESC power units would retire shortly, as two units of Korangi power station are due to become non-operational in 06-07 and 07-08; Korangi Town gas turbine power station in 07-08 and SITE gas turbine power station in 08-09.

The demand for electricity is growing fast and Karachi is estimated to be in need of additional 1,300 MW electricity in 2007. People will continue to suffer for a long time with no signs of respite.