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The Power Sector

The Power Sector | Dr Farrukh Saleem

Manifesto promises: On March 7, 2013, the PML-N came out with a 104-page election manifesto. Here’s a brief text analysis of the manifesto. The term ‘energy’ appears 42 times; the word ‘agriculture’ 25 times; the word ‘reform’ 48 times and the word ‘expenditure’ 6 times. What that means is that the PML-N made 42 power sector specific promises.

Losses: As per data maintained by the Pakistan Electric Power Company (Pepco), losses in 2014 (July-May) stood at 18 percent. In 2015 (July-May), losses increased to 18.3 percent. To be certain, that is not much of an increase but the direction is negative-not positive.

Recovery: As per data maintained by the Pakistan Electric Power Company (Pepco), recovery in 2014 (July-May) stood at 87.8 percent. In 2015 (July-May), recovery actually improved to 88.6 percent. To be certain, that is not much of an improvement but the direction is right.

Circular debt: In 2013, the receivable side of circular debt stood at Rs411 billion. Alarmingly, the receivable side of circular debt increased to Rs512 billion the following year and it now stands at a colossal Rs627 billion. The payable side of circular debt has also gone up from Rs207 billion in 2013 to a record Rs351 billion as of the last day of May 2015.

Independent Power Producers: As per published financial statements, Hubco, with Hussain Dawood as its chairman, reported a return on equity of 35.7 percent. Nishat Power Limited’s financial statements reported a return on equity of 28 percent. What that means is that our IPPs are raking in extraordinarily high profits in a business where returns are guaranteed by the Government of Pakistan.

As a consequence, the price of electricity is the highest in the region. Industrial consumers in Pakistan have to pay anywhere between Rs16 and Rs21 per kWh whereby in Bangladesh industrial consumers are being charged Rs7.5 to Rs11.5 and in Gujarat the rate varies between Rs5.2 and Rs7.7 (all rates have been converted to Pakistani rupees).

Will loadshedding end by 2018? The odds are that loadshedding will get worse. Here’s why. According to the Private Power and Infrastructure Board (PPIB), our installed generation capacity is 23,538MW – and we routinely generate about half that much. So, to be certain, loadshedding is more of a governance issue than a capacity constraint.

In the private sector, a total of nine coal-based power projects are being tossed around. Of the nine, the 6,600MW Pakistan PowerPark, the largest of them all, has already been shelved. As far as oil/gas fired power plants are concerned, the Kandra Power Project in Sindh, with 120MW capacity, is on but its gas supply is yet to be confirmed. The 147 MW Patrind Hydropower Project is expected to be completed by April 2017.

In the public sector, the Nandipur Thermal Power Project remained under construction for seven long years and had to be shut down after five days of operation. In the public sector, the Neelum-Jhelum Hydroelectric Project has been under construction for the past seven years and is still not complete (the new date of completion is end-2016). What that means is that nothing significant is going to be added by 2018.

For the record, Pakistan is going through two distinct phenomena which would have a direct impact on electricity’s demand. One, Pakistan is going through the fastest pace of urbanisation in the whole of South Asia. Two, global warming is bound to increase the demand for power. By 2020, we are going to need at least 35,000MW.

Someone intelligent once said, “Faith is like electricity. You can’t see it, but you can see the light.”

The writer is a columnist based in Islamabad.

The Power Sector | Dr Farrukh Saleem

Source: http://www.thenews.com.pk/Todays-News-9-333291-The-power-sector

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