26.05.2013 Energy challenges
Privatisation of the entire
energy sector and fair
competition amongst the power generation/
distribution companies might rid this sector of the chronic
problems, rampant corruption and inefficiency
By Alauddin Masood
Lack of focused approach coupled with bad governance, corruption and poor management have contributed to making the lingering energy crisis very critical.
Till now, the country has primarily been relying on two major sources of energy — natural gas and electricity. While the demand for natural gas has been rapidly increasing for use as domestic fuel, power generation and to run the industries, the country has been facing shortage of about 2,000 MMSCFD (million cubic feet) of gas as a result of depleting gas reserves and increasing public demand.
As regards electricity, at about 23,000 MWs the country’s installed generation capacity exceeds the peak demand by about 5,000 MWs. A capable leadership and corruption-free efficient management could have made the country a net exporter of electricity. But, how unfortunate due to financial crunch and other factors, like poor management, corruption, electricity theft, low recovery of revenues, high line losses and delay in payment of dues to private power generation companies, the citizens are not getting uninterrupted power supply for the last many years. The inability of official quarters to timely make payments to oil/power generation companies keep generating circular debt, a perennial problem which currently exceeds Rs400 billion.
The evil of corruption is the root cause for the ills that plague the power sector. Water and Power Caretaker Minister, Dr Mussadik Malik, in a press briefing on May 20, 2013 admitted that the Ministry of Water and Power and its attached department are the hub of corruption. He said massive corruption of Rs70 billion is going on every year in GENCOs, Rs30 billion in the transmission sector, while 200 MW of electricity is being stolen from the distribution system every day.
In an audit of NTDC’s 21 projects, the minister found that all the projects are two-three years behind schedule. He said the upgradation of Jamshoro Power House is not up to the mark. Quoting an unnamed official source, The News (May 22, 2013) said: “Even senior executives in the power sectors are appointed on the basis of ‘highest bidding’ instead of merit and performance.
In a report, the State Bank of Pakistan noted that the peak shortfall for the PEPCO system rose from 2,645 MW in 2007 to 8,398 MW in 2012, indicating a deepening energy crisis. The overall power shortfall in the country now reportedly stands at 6,900 MWs. How unfortunate? In the simmering summer, citizens have to endure loadshedding for six to eight hours in urban centres and for durations exceeding 10-18 hours in the rural areas. According to a report in daily The News (May 23, 2013), long outages and severe heat have taken 11 lives in various cities and town of Pakistan.
In 2011-12, according to Pakistan Energy Yearbook 2012, the total energy availability in Pakistan was 66.015 mtoe (Million Tons of Oil Equipment). Some 68.54 per cent or 45.251 mtoe of energy was obtained from indigenous production, while 31.46 per cent or 20.764 mtoe was imported. Amongst domestic energy sources, the share of natural gas was about half (49.5 per cent to be precise), while oil, hydel power, coal, nuclear, liquefied petroleum gas etcetera contributed 30.8 per cent, 12.5 per cent, 6.5 per cent and 0.7 per cent respectively.
As regards electricity generation, public sector entities have the capacity to generate 13,000 MWs electricity, while the private sector thermal stations can generate about 10,000 MWs of electricity depending upon the timely supply of furnace oil and payment of their dues. Till late 1970s, the share of hydel power in the energy mix was about 70 per cent and the thermal power contributed the rest or 30 per cent. Since hydel power is much cheaper, the 70:30 hydel power and thermal energy mix provided cheap electricity to the country. Unfortunately, thereafter successive governments could not undertake any major hydropower project, except Ghazi Barotha, thereby increasing dependence upon expensive thermal power and reversing the energy mix — meeting about 67 per cent of electricity needs from thermal and the rest from hydel and a fraction from nuclear sources.
In 2010, at 510 kilograms of oil equivalent (kgoe), the per capita energy consumption in Pakistan was quite low when compared with countries like China, Malaysia and USA where it was 2150, 2420 and 7885 kgoe respectively. Despite very low energy consumption and demand as compared to other countries, the energy supply in Pakistan has not kept pace with the demand. Furthermore, the demand-supply gap is constantly growing, adversely affecting the floundering economy.
According to some estimates, energy shortages have cost the nation up to two to four per cent of GDP over the past few years, resulting in the closure of hundreds of factories, paralysing production and exacerbating unemployment. In Faisalabad, over 500 industrial units have closed down. Besides, energy shortages have adversely impacted new investments in the country.
Despite such a gloomy energy scenario, the person nicknamed Raja Rental had the cheek to divert funds from some hydropower and higher education projects and spend these on the development of his Gujar Khan constituency. This is a classical example which shows that some people in power do not hold the country’s interest supreme rather their personal interests weigh heavy over everything else! Raja diverted the funds just a few months before the May 11 elections, simply to please his constituents and bag their votes. But, his eleventh hour effort did not go well with the people and the fellow was humbled in the elections.
The bleak energy situation is a cause of great worry and anxiety for the people. Intellectuals, politicians and think-tanks keep debating how the country could overcome the energy shortage in the shortest possible time. Mindful of the public sentiments, Pakistan’s leading political party — the PML-N — has publicly stated that it would try to solve the energy problem on priority basis.
On May 22, 2013, Chief Justice of Pakistan, Iftikhar Muhammad Chaudhry observed that the current power crisis seemed artificial, created by the negligence of authorities concerned. He asked the government to address the loadshedding problem on a permanent basis, taking tough decisions to tide over the problem.
Meanwhile, one of the think-tanks — Islamabad Policy Research Institute (IPRI) — has taken a lead amongst the national entities by organising three seminars, one after the other, in collaboration with the Hanns Seidal Foundtion, on energy related issues during a span of three months. The IPRI organised its latest seminar on the theme “Solutions for Energy Crisis in Pakistan”, on May 15 and 16, 2013 in Islamabad.
One of the speakers, Dr Shaheen Akhtar, Associate Professor of the National Defence University, recommended that Pakistan should diversify its energy options; rebalance its energy mix with preference to cheaper energy sources; and improve energy governance by fixing management issues, and increasing energy efficiency/conservation. Khanji Harijan from Mehran University of Engineering and Technology’s Mechanical Engineering Department highlighted the need for a quicker switch over of energy systems from conventional to renewable that are sustainable and can meet the energy needs of the country.
National University of Sciences and Technology’s Ehsan Ali pointed out that Pakistan was exporting about 80 per cent of available molasses at very cheap rates and that the molasses could be utilised to produce fuel grade ethanol by upgrading the facilities. In addition, he recommended, 6.3 million hectares of saline land should be used for algae cultivation at the expense of residual salts, and the saline water should be used for biofuel/biomass production.
Tackling serious challenge of energy required focused and sustained effort aimed at saving the economy and providing relief to the population, said another speaker Mirza Hamid Hasan. He suggested a range of measures and some hard policy decisions to tackle the energy problem. Short term measures included resolving the problem of circular debt, prompt implementation of NEPRA determined tariffs, ensuring early recovery of revenues from the public sector, checking electricity theft, power conservation and demand managements.
Medium term measures recommended by him included making the local population as stakeholders to ensure the security of installations, review of load management and gas allocation policy, expeditious installation of 4,500 MW IPPs already contracted till 2011, inducting hydro capacity of 17,392 MWs, upgradation of existing plants and replacement of outlived and inefficient GENCOs plants, reduction of peak demand through energy conservation and load management. Amongst long term measures, he recommended correcting the energy mix imbalance and improving governance.
One hopes that the authorities would accord priority to the energy issues and remove all bottlenecks that hinder the full utilisation of the already installed capacity. Privatisation of the entire energy sector, like the telecom sector, and fair competition amongst the power generation/distribution companies might rid this sector of the chronic problems, rampant corruption and inefficiency.
The writer is a freelance columnist based at Islamabad.
alauddinmasood@gmail.com