THE implementation of new power generation projects has become a source of major concern for the policy makers. But as there appears no mention of general or specific reasons for the delays, it will not be easy to take appropriate measures for setting up the new capacity standards.

Fruition of energy or power plants at economical cost requires careful implementation over a longer period by different divisions, departments or institutions blessed with committed manpower, sufficient funds and appropriate guidelines or procedures.

It would be interesting to see how the institutions concerned with various aspects of power generation capacity have been constituted and are functioning and their role in the delays. Perhaps there is need to strengthen some of the existing institutions as well as to set up new specialised institutions.

In the early 80’s, due to resource constraints faced Wapda and KESC, the private sector was inducted in power generation to supplement efforts of the existing utilities. A special institutional framework was designed and announced as part of the new power policy.

Besides, NEPRA —the regulator— four units were to be set up. PPIB is prominent these days and it works under the Ministry of Water and Power. Coal Power Cell was to be set up under the Ministry of Petroleum and Natural Resources. Not much is known about CPC activities. The other two units were Private Power Cell (PPC) with Wapda and the Private Sector Energy Development Fund, which was to be administered by NDFC.

With the merger of NDFC into the National Bank of Pakistan, now NBP manages LTCF (as PSEDF is presently known). All these units fared differently due to various reasons. Due to the restructuring of Wapda into a number of corporations including NDTC, PPC has become irrelevant. LTCF is largely monitoring the power generation or energy infrastructure projects financed earlier.

Due to lack of sufficient financial resources, LTCF is not very active in the financing of new power generation capacity. There is obviously a gap in the institutional framework, the filling of which might boost the chances for establishing new power generation capacity.

The role of LTCF was important for realising some of the larger power generation projects. This Fund was provided resources out of loans to the government from sources such as the World Bank, US AID, Nordic Investment Bank etc.

The World Bank and the US AID played key roles in establishing the Fund, its design and the policy guidelines and other parameters. Interest rate on the relent loans was not excessive. LTCF loans, normally covering up to 30 per cent of the total project cost, had longer maturity (up to 23 years as against commercial bank loans between seven—10 years or in exceptional cases to 12 years) and were subordinate to the commercial bank loans which were paid earlier before repayment for LTCF loans could start. Due to this feature, power tariff was not fully front-loaded.

LTCF features: These features made LTCF loans very attractive, though some of the project sponsors at that time preferred to borrow from the International Finance Corporation (IFC) for implementing some of the IPPs. Perhaps, there is a need to re-activate LTCF financing though it might not be having all the features it had in the earlier days. Additionally, it might have some added features that the current situation demands. The authorities might like to consider the idea and realise the full potential of the LTCF.

Presently the Power Policy 2002 is largely operative. It discourages power plants based on furnace oil. Instead of thermal power plants based on coal as fuel and hydro power plants are given more incentives. The financing of coal-based power plants and hydro generation plants is considered more difficult and therefore there is ample justification for the concessionary financing from LTCF for facilitating the completion of financing package.

Moreover, there might be justification for revision of some elements of the Policy-2002. PPIB is expected to play much bigger role in bringing on steam additional power generation capacity from the IPPs, sugar mills, captive power plants (CPPs) installed in cement or textile sectors, hydro power projects promoted by provincial governments or whatever other source that has the capacity to supply power to the national grid at reasonable tariff.

Sugar mills have the potential to spare some of the self-generated electricity for the national grid. This potential largely remains un-tapped, partly in view of the fixed ideas of stakeholders. Private sector would like a deal that promises handsome profit while the utility wants to keep its overall cost at the minimum. In view of the looming shortage of electricity, a compromise tariff could be possible.

Besides sugar, cement and certain textile mills have the potential to meet critical power shortages. Policy measures and procedural steps need to be streamlined for facilitating the whole process of sale and purchase of bulk power. LTCF might possibly have a role in the financing of such facilities which supply sugar mills the needed plant and machinery for larger generation of electricity particularly in the off season for cane crushing. LTCF might also finance the requirement of cement or textile plants.

Provincial governments particularly those of the NWFP, AJ&K and the Punjab seem anxious to implement hydro power plants of below 50 MW capacity. For funding such projects, these provinces are dependent on the federal government and / or international financing institutions such as the World Bank and the ADB. LTCF, if properly revamped and funded, could have a role in facilitating establishment of such projects.

Public-private-partnership: It holds promise for implementing hydro generation projects which otherwise might take considerably longer period for gestation. There is a need to provide necessary guidelines to stakeholders that would make them able to undertake such venture projects for mutual benefit.

With the restructuring of Wapda into over a dozen corporations, there is big scope for financing of these new corporations by the IFIs. Most of these will need extensive capacity-building, besides major revamping of generation or transmission facilities inherited from Wapda. They need major cash injections to have sound basis for future operations.

In fact, the World Bank, the ADB and the Islamic Development Bank are exploring financing or other possibilities. LTCF, if properly equipped with required manpower and funds could play definitive role in such a financing. The country should have a financing institution of its own which should interact with the IFIs and at times make joint financing of important power and infrastructure projects. LTCF, if nurtured properly, could easily become such an institution.

The government is in the process of developing an infrastructure fund with the help of the ADB. The LTCF originally meant for financing private power projects including allied energy infrastructure projects could be easily upgraded for the purpose. Besides, financial resources and policy guidelines, efforts were made to bring LTCF to a certain level of competence which at that time was acknowledged by various quarters.

The Karachiites have bravely suffered power shortages and blackout in the recent weeks. KESC had to rely heavily on Wapda for bulk power supply to meet increasing needs of the Karachiites. Wapda somehow could manage to meet KESC needs of around 700MW. What if a similar situation arises, concurrently in some other big cities? Such a difficult situation could be tackled provided urgent policy and institutional measures adopted in consultation with stakeholders and implemented sincerely with full resources at our command.

The country is gradually offering for privatisation a number of power generation and distribution facilities. In view of the power shortages experienced in Karachi and elsewhere and the special measures undertaken to cope with the situation, it would not be a bad idea to revisit the existing privatisation policy. There is need to build enough of reserve generation capacity for exporting power from surplus parts of the country to the deficit parts.

There has to be a proper mechanism to meet such exigencies without the active involvement of the higher authorities. It needs to be seen if the existing institutional framework is robust enough to tackle the situation. If not, remedial measure might be implemented without loss of time.

The Alternate Energy Development Board (AEDB): It is striving to set up wind or solar power plants. One gets the impression that AEDB will be able to meet the power shortage which we have not been able to satisfy from traditional power generation projects. Harnessing of alternate energy sources may be seen in a correct perspective and such projects might be duly encouraged.

However, as the generation cost from such plants would be higher than the traditional hydro or thermal sources, consumers might not be burdened with high tariffs. Cost of generation in excess of average traditional sources might be subsidised separately by the government for a limited number of years.