ISLAMABAD: The Asian Development Bank (ADB) on Friday approved a combined loan assistance of about $1.4 billion for two programmes to help the government resolve power crisis, including controlling theft and increasing recoveries.

The two separate programmes — $990 million for power distribution enhancement and $400m to support ongoing policy reforms — are aimed to resolve some of the key issues in the power sector, allowing it to lift growth, boost incomes, and cut poverty, the ADB said.

The Executive Committee of the National Economic Council (Ecnec) last week approved two projects under the loan programme to meet requirement of the ADB board to formally approve $1.4bn.

The loans were due early this year but had been delayed because of inability of the authorities in the ministries of water and power, and finance to meet various deadlines for power sector reforms and conditions of the World Bank and the Asian Development Bank.

‘Nearly 20pc of generated electricity is lost due to high technical and commercial losses’

These included creation of Central Power Purchasing Agency (CPPA) Guarantee Ltd, its registration and operationalisation to act on behalf of power generation companies and distribution companies to acquire and sell electricity and seek tariff approvals from the National Electric Power Regulatory Authority (Nepra).

On completion of these conditions, the World Bank approved $500m loan — Development Policy Credit II — in the second week of this month and formally signed an agreement with the government of Pakistan on Friday.

To enable board approvals, Ecnec approved in principle advanced metering infrastructure (AMI) projects for Islamabad and Lahore electric supply companies (Iesco and Lesco).

The two projects also include establishment of new customer information billing systems for the two distribution companies (Discos). The project in respect of Iesco entailed a cost of Rs18.607bn while for Lesco the cost was estimated at Rs30.597bn.

These projects are expected to enhance load control and load management in the two Discos and reduce losses and to efficiently balance power supply and reduce load-shedding through alternative ways of managing peak load.

AMI system would have smart meters, in-house display units and shall provide head-end system (HES) software for effective liaison between meter and the management information system. A constant watch on the demand and supply position would be maintained through the AMI to guard against any breakdown.

This AMI system would be supported by ADB’s $990m multi-tranche Second Power Distribution Enhancement Investment Programme that would be subsequently spread to all Discos.

The $400m loan for the second sub-programme of the Sustainable Energy Sector Reform Programme will support ongoing policy reforms, aimed to build an affordable and secure energy sector.

“Nearly 20 per cent of generated electricity is lost due to high technical and commercial losses and measures like the installation of the AMI system are necessary to counter this,” said Adnan Tareen, senior energy specialist of the ADB. “The two programmes, collectively, will help create a more efficient, transparent, modern and sustainable energy sector.”

Pakistan is struggling with an ongoing power crisis which puts pressure on real GDP growth. The electricity supply-demand gap of 5,000 megawatts is blamed for a sharp decline in manufacturing.

The government — with ADB as its lead donor partner — has been taking a number of measures to overhaul and reform the sector, but inefficiencies and gaps remain due to a growing demand for electricity.

Discos face financial problems with customer tariffs being lower than the cost of service, and high system losses resulting in delayed payment to generating companies, necessitating imposition of a number of special surcharges on consumers honestly paying their bills.

The distribution enhancement programme will install advanced smart meters at distribution companies across the country to reduce power losses and boost company revenues. A modern, computerised customer billing and information system will also be put in place to improve service quality. This infrastructure will be rolled out in phases, covering Pakistan’s major cities and industrial and commercial hubs.

The $400m programme is aimed at supporting policy measures to address extensive debts in the electricity sector, as well as further market reforms to improve the efficiency of public sector power companies and to encourage competition through more private sector participation.

Published in Dawn, November 21st, 2015