The enduring energy crisis
By Sultan Ahmed
OFFICIAL inaction in the area of adequately increasing the energy output or its ready availability to meet the needs of the people for the last seven years has made them face the prospect of increasing loadshedding with all its crippling impact and the Water and Power Development Authority (Wapda) fears a shortfall of Rs84 billion to meet the challenge. The government will again come to its help and enable it receive the financial assistance in the form of a large budgetary support, commercial bank loans and sanctions for higher electricity rates apart from permission to import furnace oil. All that will add to the financial liabilities of the Authority, earlier dubbed as white elephant.
The cheapest source of power is the hydel power from large dams, but the government has waited for seven long years to decide on the five dams led by the Kalabagh dam, Daimer, Basha dam, Akori dam etc. It could have taken a decision on the other four dams and got down to work earlier if a political consensus on the Kalabagh was not coming forth.
But it waited for too long and ultimately President Musharraf had to exercise this option in favour of the Kalabagh dam and move ahead cautiously.
They are to be completed by 2016 — nine years from now when more hydel power may become available.
The Wapda has a loss rate of 23/24 per cent of its output even after strenuous efforts to reduce its heavy loss rate.
And each percentage of the power lost means a loss of Rs2.5 billion. Even when the power is paid for in full, the Wapda is a loser.
Its production costs per unit is Rs4.75 and its sale price is Rs4.10 — a loss of 65 paisa per unit.
Wapda has to receive Rs50 billion from Fata and the the NWFP including Peshawar. And it has to pay Rs100 billion to the independent power producers for the power it buys and for that it doesn’t use.
It often buys power at a higher rate than it sells to the consumers along with the cheap hydel power it gets from the large barrages.
This happens as the power tariff has not been increased since November 2003 which it has to do now.
The World Bank and the International Monetary Fund (IMF) have been urging the Wapda and the government to carry out the power sector reforms suggested by them and accepted by Wapda.
It has to unbundle its 12 distribution companies and let them charge their own power rates.
The donors argue that if the power sector reforms are not carried out in full they will not extend large loans for the big dams.
The government is slow in implementing the reforms for fear of political fallout of the high power rates. But now it cannot resist or delay any longer but this is the election year in which it is not politically wise to ruffle the millions of voters’ feathers.
Wapda has been helped to an extent by the fall in oil prices. Otherwise it would have needed a total financial support of Rs90 billion.
But even now the cost to the nation for the oil import this year may be $7.5 to 7.8 billion as against $6.5 billion last year and that is the outcome of an 80 per cent rise in the fuel oil consumption.
Wapda`s cash shortfall in 2002 was Rs30 billion. Since then there has been a 180 per cent rise in the need for financial support. The government had come up earlier with financial assistance of Rs100 billion. The shortfall in June was Rs56 billion.
The government used to protest that it had to pay an annual subsidy of Rs100 billion to the public sector before the process of privatisation began. Now that the privatisation is half way through there is still a demand for nearly RAS100 billion from Wapda while the privatised Karachi Electric Supply Corporation (KESC) has to look after itself.
While the oil prices have now come down to 55 dollar a barrel, the oil producing countries are disturbed and they want to hold up the price around 60 dollars a barrel if they can.
And they are meeting soon to reduce their oil output and raise their oil prices.
In such circumstances China has called for an Asian buyers’ cartel or association to safeguard their own interests.
This is the right move at this hour.
While the prospects of the oil prices staying high are real, little efforts are being made to reduce the waste and theft of power in Pakistan by the Wapda and the KESC. Wapda, by its own admission, loses a quarter of its power (23-24 per cent).
It produces after it has come down from the 40’s range. It is losing a lot of money on this core at the rate of Rs2.5 billion for a percentage of power lost.
KESC`s power loss had shot up to 17 per cent for a while in 2004 before coming down. What is the rate of theft and waste now that it is privatised has not been publicly stated. It is doing its theft catching work quietly.
Some of the power thieves are influential persons or powerful officials. One has to be wary of ruffling their feathers. The others in the Katchi abadis are well organised and militant enough to resist Karachi Electric Supply Corporation (KESC) moves. But these days some of the poor are being charged exorbitant rates arbitrarily.
The massive power theft must be rooted out in a systematic manner. Otherwise the poor and the middle class will continue to pay very high rates for power as well as suffer the privations of frequent loadshedding.
The need of the hour is a relentless drive to cut waste of power and promote energy conservation assiduously. But in reality the waste is on the increase and very conspicuously.
The wedding galas are getting larger and fancier and opting for elaborate illumination. The houses are illuminated more fancily than before and for a larger number of days. Wedding halls with mindless illuminations are increasing in number.
Many of them are lit up even when there are no functions taking place there. Each major wedding is having too many functions as compared to before and are orchestrated by professional event managers. In this context the old question of whether to serve wedding dinners or not has become absurdly out of place.
The KESC staff gets 999 units of power free in a month. It costs the company a lot of money than when a unit used to cost 25 paisa.
In such an environment the need for energy conservation is hardly mentioned.
It has become an obsolete slogan with the president and the prime minister attending many wedding functions, no host feels he has to exercise any restraint in spending.
On the other side, the government has come up with a liberal and comprehensive Alternate Energy Policy which if earnestly and fully implemented will reduce the need for oil and gas. But while it wants wind power, solar power, hydel power and power from coal etc, there is no organised drive to make the policy popular and make it a success. The policy with its positive merits and liberal rewards needs active and imaginative salesman ship.
Usman Aminuddin , a former petroleum minister, says Pakistan can get more energy out of the Thar coal reserves than what China can provide out of its energy reserves.
The methane gas from Thar coal can eventually provide all the gas we need, he says. We are supposed to seek the assistance of China in this area, but we have been tangling with the Chinese company trying to get the gas out of Thar as the company wanted 50 per cent of the profit.
But now the dispute appears to have been settled. Let us wait for some real action.
China should be made to feel we are earnest in getting energy out of Thar coal and in expanding the projects to its full steadily. That is all the more imperative whenever energy demand rises by 50 per cent in two years.
Energy shortage is a three-dimensional problem for Pakistan. When oil prices rise, the government has to provide a large subsidy to Wapda out of its tax revenues. And when higher oil imports consume as much as $7.5 billion, it strains our external account excessively.
All that results in high electricity rates which the people and the industry cannot afford. Then, there is the exasperation of continuous and frequent load shedding which sometimes produces violent outbursts.
So the country as a whole should take the energy issue far more seriously rather than leave it to the government to manage it alone.


