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Gas denial to 4 plants costs Rs100b a year

November 13, 2012

LAHORE, Nov 12: The inability, or unwillingness, of the government to provide gas to four power generation plants close to Lahore (read load centre) is costing consumers a staggering additional Rs100 billion a year but the ministry of petroleum is still unmoved.

In the absence of gas, these four plants (Saphire, Hallmore, Orient and Saif of 225MW each) are being run on diesel, which takes per unit cost to around Rs19 per unit instead of Rs5 per unit if run on gas.

According to officials of the Pakistan Electric Power Company (Pepco), these plants, which were established under the 2002 Power Policy, were supposed to run on gas for nine months a year, two on diesel (if gas is not available during December and January) and one month closure for maintenance.

The owners of the plants were told to design their plants on these lines. In total, 12 plants were installed in the country under the 2002 policy, but these plants were essentially gas-specific. They are also the most efficient plants in the country, with efficiency level in high-40s percentage against others like the TPS Jamshoro, which is around 20 per cent.

“But, none of the plants have been given full gas quota since the beginning of operations,” says an official of the Pepco. They came online during 2010-11. Since then, the gas supply to them has been less than 50 per cent, if averaged out. They occasionally get gas and are the first ones to be disconnected when shortages hit the country. The company is arguing with the government for the last one year to spare 152 million cubic feet a day (mmcfd) for these plants to produce 900MW cheaper electricity, but to no avail,” he regretted.

“If the government spares gas, the power sector would actually be making a profit of around Rs4 per unit,” says a retired employee of Pepco finance division. If not, it ends up subsiding each unit by Rs11. Out of current loss (around Rs350 billion a year) of the power sector, Rs100 billion (or 28.51 per cent) is coming from these four plants. Their generation cost is Rs8.33 billion a month or Rs273 million a day. All these calculations have been shared with the ministry of petroleum and other relevant quarters time and again,” he regretted.

“Apart from the financial benefits, which are big enough to override all other considerations, these plants are the most efficient, the most cheaper and are located near the load centers in the country,” says an official of the National Transmission and Dispatch Company (NTDC). Generation from them does not overload the system because power (from them) travels very little distance before being consumed in the city of Lahore and industry in Sheikhupura and Sahiwal.

Taking all these considerations into account, the NTDC has also favoured these plants but the federal government has failed to paint a macro picture of gas shortages and calculate cost-benefit ratio of its decisions. The decision-making process is hijacked by the vested interest in complete disregard to the expert advice. The ministry and its bureaucrats have overtaken the entire decision-making, multiplying the cost for the sector and the country,” he concluded.