Pakistan: Battery Low-Please charge

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Pakistan: Battery Low-Please charge

Postby Spearhead Research » Fri May 06, 2011 1:24 pm

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Spearhead Analysis - 06.05.2011

Pakistan: Battery Low-Please charge

Once again the summer season is upon with scorching summer temperatures and there seems to be no respite from constant load shedding. Every passing year, the situation of power crisis continues to get worse whereas one expects it to get better. Just as the whole world continues to move forward and progress, Pakistan seems to be on a regressive path. In view of an acute shortage of electricity, fast rising unemployment, deteriorating law and order situation and day to day increase in the prices of petroleum products it is about time for the government to reset its priorities and focus on these pressing issues. The present state of the electric supply and power plants is that most of them have run out of the capacity either because of delay in financial payments or shortfall of oil or gas.

The power shortfall, which last year was around 2500 Megawatts, has increased up to about 7200 Megawatts and load shedding of 12 to 16 hours is being observed in the urban centers of Punjab. The nation is all set to rise for revolt against days-long power outages and the people are disenchanted because of false promises made on the premise of a long term fix for power outages.

These protests are right now dispersed and not well coordinated. But this is just the start of the summer and of these protests. Rest assured, as the summer will be getting more scorching, the load shedding will increase and it would be very soon round the clock and the protests will become violent and then eventually spiral out of control. WAPDA has already started securing its installations and converting their offices into fortresses. But that won’t help them much as the people are fed up to their lives. Because of a lack of a constant supply of power the already appalling state of the economy is in shambles. The industrial sector is on the verge of a collapse and most of the businesses would soon be out-of-business if a solution is not charted out by the ruling powers.
Before going into further detail of the whole scenario; it’s better to take a cursory look at the factors which have accounted for such mismanagement of electricity and power generation.

Since their inception, KESC and WAPDA both are fully-integrated generation, transmission and power distribution companies controlled by the Government of Pakistan through the Ministry of Water and Power. The main problem does not seem to be the power generation capacity because total installed capacity today stands at 21,690 MW at national level. Pakistan's energy crisis is mainly due to a surge in demand, a failing power distribution infrastructure and shortages of oil and gas.

Even Historical data suggests that Pakistan has never been able to effectively meet its own power generation demands. A burgeoning population coupled with robust economic growth reflected by an average GDP annual growth rate of 7% in the 80s brought about a sharp increase in overall electricity demand. During the 90’s the shortage reached to around 40% and to accommodate such a deficit the serving government (PPP) of that time attracted several IPPs (Independent Power Producers) which effectively led to around 6000MW of generation capacity. But the Asian Financial crisis coupled with the Pakistani Nuclear tests and the post 9/11 scenario had a negative impact on the economy and led to a diminished demand for electricity. During that time excess but expensive electricity had to be purchased from the IPP’s because of guaranteed capacity payments despite their under utilization.

During the post 9/11 era, where the Pakistani economy under the military led government experienced phenomenal growth, which was partly due to increased remittances and inflows from aid received in the war on terror. All these factors led to a staggering rise of about 10 percent in the electricity demand of the nation. The surplus capacity generated during the 90’s had made the government complacent and it only woke up to the demand-supply gap in 07. To counter this number of new IPP projects and the controversial RPP’s (Rental Power Plants) were initiated.

Despite all the facts the major culprits for inefficiencies in the power sector are because of poor governance, red-tapism, and political interferences. Transmission & Distribution (T&D) losses have amounted to a staggering 30-40 per cent of the total output. This was as much a result of a lack of adequate investment in the strained transmission network as of the power thefts by various groups and individuals. On average, about 20 per cent of dues were not recovered, most of them owed by other public sector entities.

To counter such inefficiencies and with the help of ADB and the WB the government set forth an ambitious power-sector restructuring and liberalization program in the 90s, with an eventual aim of privatizing the loss-making entities and moving towards a market-driven electricity sector. KESC was privatized and WAPDA was in the process of being privatized but there was a lot of hue and cry over the sale of national assets during the tenure of a corrupt government. T&D losses have averaged 35 per cent since privatization of KESC, only marginally down from the 40 per cent prior to that. Furthermore, KESC as well as WAPDA, both are still involved in the circular debt crisis owing large payments to Pepco and its fuel suppliers. In all circular debt, lackluster performance, mismanagement and inefficiencies of the utility companies are the biggest culprit of power shortfall in the country.

Over the past few days, Prime Minister Gilani has been consulting with the Chief Ministers of all provinces and summoned a meeting of the Council of Common Interest last week to discuss the growing power crisis with the provinces and to chart out a way to reduce the electricity demand. The finalized proposal after these talks include reducing the workweek to five days from six, ensuring markets are closed by evening and having weddings end by midnight. While these conditions may temporarily help ease the crisis, Pakistan needs a long term plan rather than a short-term fix for the current crisis.

It’s about time that the government should realize that false promises to end load-shedding in the coming year are full of hot air and the people know it; by carrying out load shedding in the current year, one cannot understand how it is a viable step towards energy sufficiency and end to load shedding next year. Therefore, these statements by the government only serve to dampen the image of the ruling party and will anger the public even more.

There are a number of alternate solutions which the government can make use of to end this crisis, but one fails to understand why no thought has been put to implement alternate energy generation sources such as solar power, wind power, nuclear power or power generation through coal (through environmentally sustainable means of exploiting coal resources). Up till now, the government was able to generate a negligible 3-MW wind power to the system and there seems to be no physical progress on utilization of Thar coal reserves for commercial power generation. Furthermore, China offered to set up a 1 giga watt nuclear power generation plant along with refurbishing and upgrading the Chashma and Karachi Nuclear power plants, but the government does not seem to be much interested and is in fact looking to purchase power from external sources, such as the CIS countries and India, which is not feasible and does not look very promising. Wapda is also looking forward to the association of Turkish companies on its projects through international competitive bidding but it seems like more of a false promise rather than an actual policy matter.

It is also important to point out that if the government comes up with a long term fix for the problem then it would be much easier to implement these new policies right now as the country is still in the process of rehabilitation form the devastation caused by the floods. The people are fed up of the ever increasing power tariffs and false promises; they want actual solutions to their problems because ordinary life and the economy have come to a stand-still because of ongoing power crisis. The next few months would be crucial for the government to prove that the trust of the civilians was rightfully placed in them; if they are unable to perform then the condition of the people will be similar to that in Egypt and Libya, and the state will follow suit.

Spearhead analyses are the result of a collaborative effort and not attributable to a single individual.

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Power generation – KESC in reverse gear after privatisation

Postby Spearhead Research » Mon May 16, 2011 1:14 pm

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Power generation – KESC in reverse gear after privatisation

Power utility’s generation decreased by 1.34 billion kWh since 2005

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KARACHI - The privatisation of the Karachi Electric Supply Company (KESC) in 2005 has proved to be a bane than boon as instead of increasing, the power generation of company has reduced by 1.34 billion kWh since then.

The company, which was generating around 9.30 billion kWh in 2005, was generating only 7.96 billion kWh during 2009-2010.

A financial report of the company shows that its power generation per kWh has steadily declined in the last six years after foreign firms took over its management.

The KESC generated 8.26 billion kWh, 8.66 billion kWh, 8.16 billion kWh, 9.13 billion kWh and 9.30 billion kWh during 2008-2009, 2007-2008, 2006-2007, 2005-2006 and 2004-2005, respectively.

Instead of enhancing power generation in accordance with agreements, the Dubai-based firms, which acquired control of the KESC, did nothing but depend on the supply of electricity from sources like WAPDA and independent power producers.

The addition of at least 10 percent electricity was needed every year to meet the ever-increasing demand of the city, sources said. Criticising the KESC’s failure to increase power generation, KESC Shareholders Association General Secretary Choudhary Mazhar Ali in a statement issued on Sunday said that the management of the company has deliberately decreased generation to buy less fuel.

Nine 25 MW gas-operated generating units were decommissioned and their share of the gas was provided to the rental power plant of EGRICO, which charges $ 2.8 million per month for two years for just 50MW of electricity.

“The shareholders believe that heavy kickbacks were received in this deal,” he said.

Ali said that NEPRA has allowed the KESC to increase its tariff four times during the last six months and the power utility is again demanding a hike of Rs 2.2 4 per unit in rates for the quarter ending March 2011.

The company has billed more than two million consumers for 2,132GWh units for this quarter and if the increase is allowed, the company will squeeze more money out of the already overburdened consumers.

“Using its manipulative ways, the KESC will receive a subsidy of more than Rs 30 billion every year on the basis of tariff adjustment. This subsidy prior to the privatisation of the company was only Rs 1.4 billion given by the government on the same basis,” Ali pointed out.

“The company is presently was being run as a private company but its management is neither following the company’s ordinance nor giving importance to NEPRA rules,” he added.

He said that in multi-storey buildings, the electricity of those consumers, who have cleared their dues, is also being disconnected along with the defaulters.

“This has been done at Plastic Plaza in Gulshan-e-Iqbal on May 10,”he added.

He said that the company’s shareholders are not being given any information about the policies of the management and even their written questions are not being answered. “The rules of the Companies Ordinance are being violated and elected directors are paid half a million rupees per month without the proper approval of the ‘general body’ of the company,” he said.

Ali said that top technical posts in the KESC are being held by non-engineers disregarding the Pakistan Engineering Council Act, exposing its system to failure, as has happened in the past for which the company was fined by NEPRA.

He said that more than 5,000 employees have been made redundant although they are being paid their salaries, and in their place, another 5,000 people have been hired on double the wages, inflicting massive financial losses on the company.

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