The pre-summer of our discontent

April is set to become the cruellest month for Pakistanis as the shadow of power outages looms large over the horizon. The reasons are clear: first the government just does not have the capacity to release funds to the power sector — although the federal cabinet’s economic coordination committee had earlier approved a payment of Rs80 billion and two tranches of Rs30 billion spread out over two weeks in March. And second payments cannot be made towards circular debt settlement before a mandatory pre-audit.

With the attorney general of Pakistan’s office reluctant to offer assistance on the pre-audit issue, the prospects are looking dire indeed. Until payments are made out to power producers and fuel suppliers, one can surely anticipate little else than the closure of several power plants in the private sector. These woes are multiplied because most parts of the country, including its financial hub Karachi, are grappling with pre-summer heat fuelled by extraordinarily high temperatures.

Restrictions have been lifted on furnace oil imports for the power utility company in Karachi but on the condition that these are not diverted to other power plants. The Cabinet Committee on Energy had originally ordered the curbs last October to guarantee consumption of liquefied natural gas in power plants. Besides reducing the capacity of local industries, the ban also forced Pakistan State Oil to reschedule some import orders and led to financial losses. This also had an impact on K-Electric whose older plants in particular are dependent on furnace oil.

To stave off any power crisis in Karachi, PSO was asked to work out the fuel requirements of K-Electric plants and import furnace oil over and above the availability of the local refinery product. The preconditions spelled out are not so appealing to PSO, leaving little room for an independent arrangement between PSO and K-Electric, especially if monthly product review meetings were to decide the import volumes and schedules. Apart from K-Electric, there are several power plants in Punjab that need furnace oil stocks. In fact, the total furnace oil stocks currently stand at roughly 360,000 tons. Plants that produce over 8,000MW and run on furnace oil don’t even have sufficient stocks for a single day.

Published in The Express Tribune, March 30^th, 2018.

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