KARACHI, May 21: The electricity crisis in the country and, particularly in Karachi, is set to worsen by early next week as Hubco, the biggest independent power producer, faces acute fuel shortage and may be forced to close down its plant. This would cut power supply by almost 1,000 megawatts to the Wapda system from where as much as 400 to 500MW are supplied to Karachi daily.

“We are left with only 47,000 tons of furnace oil stock,” Javed Mehmood, the chief executive of Hubco said on Wednesday. Talking to Dawn he pointed out that the plant “now operates at roughly 75 per cent of the installed 1200MW capacity and is consuming roughly 4,500 to 5,000 tons of oil a day.”

“Our technical requirement is to maintain a minimum of 20,000 tons of feedstock level without which the whole plant will collapse and there is no alternate but to close down the operations.’’

At the existing rate of fuel consumption, the stage of minimum feedstock level is four or five days away. “Not that we want to close down the plant or are trying to put some pressure on any one,’’ he hastily explained.

The point is after reaching a minimum feedstock level it will be suicidal to keep the plant in operation.

Pakistan State Oil (PSO) suspended furnace oil supply to Hubco after its bank guarantee of Rs8 billion got busted. “As a matter of practice, we ask for advance payment to supply oil to our clients,” a senior official of the PSO explained to point out that oil company had been somewhat lenient to Hubco because of the sensitivity of its job -- electric power generation — and that it is a privileged client.

As for the Karachi Electric Supply Company (KESC) and independent power producers (IPPs) other than Hubco, the official in PSO expressed satisfaction on their payment position.

“A few IPPs defaulted on a few occasions but by and large it is alright,’’ he said. But the Water and Power Development Authority (Wapda) remains a chronic defaulter, which is given the facility of 15 days credit by the PSO.

The PSO has now to recover Rs12 billion from Wapda, of which Rs8 billion are in category of default. The Pakistan International Airlines Corporation has to pay Rs1.8 billion to PSO.

Closure of Hubco will spell disaster for Karachi as the load-shedding hours may have to be extended to 10 to 12 hours a day and the industry and commercial centres might have to suspend their business operations and 16 million people of the city will have to endure sizzling late May and the June summer.

But officials in PSO expect a letter from the federal water and power ministry in a day or two to guarantee payment from Hubco, which “will be enough comfort for us and we will resume oil supply to them.”

Under the agreement, Hubco is expected to maintain a minimum of 75,000 tons of furnace oil stock at a given time that could last for 21 days. Hubco’s oil stock has depleted because it is not being replenished by the Pakistan State Oil (PSO). Hubco is not paying PSO’s bill in time because Wapda is not clearing it Rs20 billion dues.

The entire group — Hubco, Kapco and Uch — contributes almost 23 per cent of the 5,833 megawatt power being generated by more than a dozen independent power producers in the country and have to recover more than Rs52 billion from Wapda.

Officials in Wapda say that they start experiencing delay in their payments from Wapda since September 2006. The problem started getting from bad to worse despite several representations, communications and meetings at the highest level with the former prime minister to the minister of water and power of this government.

Financial analysts say that the government, the utilities and the oil and gas companies are now entangled in a circular debt that amounts to Rs250 to Rs300 billion in all.

Sources in banks hint at the quite moves being made by the government to seek top bankers’ help in settling this issue by way of giving two to three years bonds for which there may not be any government guarantee but an assurance from the top officials.

“Not much enthusiasm is shown by the bankers as the government seems to be desperate to resolve it before the next budget,” a retired banker disclosed.

“In 1999-2000 Pakistan was caught up in a similar circular debt situation,” recalled the banker saying that the then finance minister Shaukat Aziz had then blown up this issue and blamed the previous governments of mismanagement. “History is repeating itself now and the government is trying to exactly do what Shaukat Aziz and his team did in 1999-2000 and later,” he said.