PAKISTAN, at present, is facing the worst power crisis which has engulfed the national economy in a stifling embrace. Industrial productivity has gone down and the situation portends badly for exports and the ensuing balance of payments. It is important to chart a course which, besides taking us out of troubled waters, also ensures power affordability. An instant study should strive to detail both the supply and demand side measures in the offing and recommendations to further improve upon the situation.

Power sector has always been finance intensive. It is large investments alone that make the sector move over to the next generation of technologies – a must for the viability of any standard system. Without new investments and heavy outlays on operation and maintenance of power systems, the sector will simply stagnate. The power sector comprising the 12 Pepco-managed companies in the public domain and the KESC in the private hands, seem to have stagnated.

The power sector has been neglected over the years. The Water & Power Development Authority (Wapda) has been relegated to the back-burner, while new entities headed mainly by generalists had been tasked to come up to the expectations of consumers. The Private Power & Infrastructure Board (PPIB) and the Alternate Energy Development Board (AEDB) can be quoted in this context.

The government’s one-page notification of 1987 and the subsequent 1994 Power Policy sealed Wapda’s fate with the decision that all new thermal power projects would only be set up by the private sector through one-window facilitator known as the PPIB. Wapda could work on hydro projects, including those coming under the ambit of hydro generation, and nothing else. However consensus could not be reached by the federating units in this regard.

Coming back to the past investment, over $6.5 billion was invested on arranging for 5728 MW of power during 1994–1996 (evident in shape of power stations set up during 1996–1999). This led to issues of handling the surpluses against the earlier shortages. And Wapda, then under soldierly control, was at the greatest of loss to utilise the newly inducted generation capacity. The then president was convinced that the actual issue was the sale of surplus power and not any shortages around the corner – probably the reason for complacency thereafter.

The issue of IPPs was wrongly tackled during 1997–2001. Instead of arranging matters of any wrong doings to avoid repeats etc and to use the space created by 5728 MW of power and start projects for production of cheap power by 2005–06, the first four years of the decade were wasted by simply crying foul and Wapda’’s (non-professional) management could not sell the excess IPP power.

This led to the crises being faced now and also acted as a means to scare away private investors, especially the foreigners. No headway was ever made to garner hydro-power in the private sector under the 2002 Power Policy.

The situation would not have been that problematic and grim, had the power customer contained itself to the normal load growth of 2-3 per cent per year instead of breaking all barriers to reach a whopping 15 per cent during 2006-07. This unprecedented load growth was the result of consumption rather than the development/production-led economic growth. Pakistan became an importing nation, a dumping ground for energy inefficient goods that burdened the economy beyond relief.

Further study revealed that the power consumption was totally skewed towards wasteful use. Our 62 per cent growth was evident in the domestic and commercial sectors (basically shops) alone, while 18 and 17 per cent of the total growth was seen in the industrial and the agricultural sectors respectively. The growth in power usage for the industrial sector was only one fourth of the increase in usage in the domestic and the commercial sectors.

The situation is aggravating with power shortages of 3500 MW during canal closures as against 5000 MW in the last summer. No worthwhile investments were being made in the sector, while demand was growing at 14 per cent per year. The situation became bad to worse due to the poor hydrological conditions of the calendar years 2007 and 2008, lesser supply of gas and the constrictions in fuel oil supplies and lastly, on account of financial constraints due to huge receivables of the power utilities and high cost of production compared with the sale rate.

With this, we saw load-shedding first in 2002-03 and then regularly from 2005-06 onwards. All this was compounded by the belated raise in power tariff in September 2007 after freeze in tariff for nearly four years from November 2003 onwards and the non-payment of subsidies (non-budgeted) to Wapda – a cause of the most damaging Rs400 billion circular debt.

What is the way out? We would have to undertake both supply side and demand side measures in order to come up with the solution. The supply side measures would include installation of rental power plants in private sector, expeditious installation of IPPs already contracted by the PPIB and struck-up in the earlier myriad inadequacies of that organization, installation of new power plants in public sector, induction of fast-track generation capacity again by the PPIB, rehabilitation of Genco’s existing plants and full utilisation of redundant capacity of captive power plants.

The demand side measures include reduction of demand through energy conservation and load management, as a MW saved in fact, is better than a MW generated. Both additions to the capacity and curtailment of wastages have to be taken up concurrently.

The government has taken up provision of new generation capacity very seriously with six rental power plants totaling 1002 MW planned for Faisalabad, Guddu, Sialkot, Multan and Quetta. These hopefully would start producing power by July–August 2009. Similarly, an addition of 502 MW of hydro power to the system is seen by 2011. So as to further improve upon the ante, 22 IPPs with a grand total of 4608 MW are on the anvil for joining in by June 2012. This addition is phenomenal to say the least.

As power demand is growing at 8.53 per cent annually, which may be down from the high 14 per cent of last financial year (amongst the highest in the world), the government has decided to take up fast track projects through the PPIB. Incidentally, such spare equipment is available in Africa and the Middle East once the loads have been connected to regular grid supply or on account of redundancies etc.

These fast track plants (totaling 1366 MW) include Walters Rental Project Karachi, Karkey Rental Project Karachi, Cavalier Energy Project Port Qasim (OC) Karachi, Progas Energy Limited Port Qasim (OC) Karachi, Ruba Energy Project (CC) Karachi and Progas Energy Ltd Port Qasim (CC) Karachi. Here, we see some problems in opening up of the SBLCs etc, but, hopefully, all of these would be resolved very soon.

In order to ensure that all possible facets of power generation are tapped, Pepco mainly and to some extent the KESC also added captive power to their generation capabilities. This has beefed up the present supplies by about 250 MW of badly needed power, while a potential of 1500 MW remains to be tapped. However, further additions will depend upon the provision of hi-efficiency equipment at nearly all relevant industrial units and high pressure boilers along with corresponding turbines and generators at the various sugar mills.

Additionally, in order to mitigate the present power shortages, Pepco and KESC seriously need to take up effective demand side management and conservation measures through public awareness campaign for closure of shopping centers/plazas after sunset, staggering of industrial holidays, interaction with industries for reduction of loads during peak hours – especially steel furnaces, induction of energy saver lamps(CFLs) to replace incandescent bulbs and tube lights, loss reduction by Discos through ELR projects.

Other conservation measures including switching of bill boards and alternate street light points and switching of unnecessary lights and appliances at peak hours voluntarily by the general public too have to be arranged.While Pepco is on track, KESC would need to immediately follow suit.

The listed supply side measures also contain certain inherent risks. These include the heavy dependence of new generation capacity on imported oil, the logistics nightmare in the making for feeding the tens of small IPPs/new plants, the likelihood of tariff increase in the immediate future, the possibility of break-downs in the small size IPPs and danger to the power system as a whole because the scheme of things does not cater for many a contingency.

As a consequence, the IPP size needs to be extended to a minimum of 2000 MW

for economy of scale etc. through setting up of such plants in close clusters/special parks.Incidentally, our neighbouring India facing an equally daunting challenge to contain it’s runaway power deficits has upped the IPP ante to mega-projects of 5000 MW and above.

In their case, investors have to arrange for their own fuel viz cheap coal and gas. That both Tata and Reliance groups are on way to add 10,000MW of such power through indigenous gas and imported coal, (Tata has acquired a coal field in Indonesia specifically for the purpose) serves us as an eye opener and a path to follow.

On the other hand, Thar Coal generation should be handed over to Wapda. When the private sector remains shy of developing this area, mining of coal may be tackled by the Sindh Mines & Minerals Department and the Pakistan Mineral Development Corporation (PMDC) jointly. This as the only viable option to utilise our own huge coal reserves of 184 billion tons.

After the immediate problems are tackled, there is a need to revert back to the earlier system of implementing planning strategies evolved by the Planning Commission on a five-yearly basis. The presently dormant National Power Plan of 1995 (after amendments) needs to be considered for future capacity generation.

The government would also have to persuade the privatised KESC to stop leaning on Wapda/Pepco for its daily needs of 600 – 800MW and start investing on new generation capacities at once. Actually, non-investment on part of KESC is acting as a great drag on the economy. If KESC does not increase its own generation, various pressure groups may not allow such transfers from Pepco for long.