Energy crisis: Fuel shortage decreases power production by 10%

Electricity shortfall rises to 5,000MW as energy sector struggles to operate with circular debt.

Express June 18, 2011


The country’s acute shortage of petroleum products has begun to affect electricity production: power stations are supplying 1,500 megawatts less (or about 10.3% of production) as a result of the fuel shortage, bringing the overall gap between power supply and demand to 5,000 MW and causing 12 to 14-hour power outages throughout the country.

“The country has lost 1,500 MW of power generation due to the closure of several independent power producers (IPPs) including Lalpir, Japan, Kapco and Sepcol which have shut down due to the shortage of furnace oil and gas,” said Ijaz Rafique, spokesman of the Pakistan Electric Power Company (Pepco).

Rafique claimed that the shutdowns have nothing to do with Pepco being unable to pay the IPPs on time. “Pakistan State Oil (the country’s largest oil distribution company) is supplying 2,200 metric tons per day furnace oil while demand from the power sector is at 31,000 tons per day. This is the reason IPPs have shut down.”

Pepco officials say that demand for electricity has gone up considerably over the last year, by as much as 28.6%, according to some estimates. Total peak-hour demand is currently estimated at 18,000 MW, while total supply stands at 13,000 MW

While the current crisis is caused by a shortage of oil, in the medium term, the power sector is plagued not by an excess of demand but by an inability of power companies to collect the bills owed to them. Pepco was set to receive Rs300 billion that it is owed from thousands of clients, including several government departments and buildings. Meanwhile, Pepco owes Rs24 billion per month to IPPs for the power they supply to its grid.

Officials blame the government’s policy to subsidise electricity in an unsustainable manner.

The government spent Rs395 billion on subsidies in the outgoing year, nearly all of it on power.

“The government is currently giving Rs2 to Rs2.50 per unit subsidy to electricity consumers,” sources said, adding that though multilateral lenders had demanded an end to the subsidy in power sector to improve efficiency, political compulsions prevented the government from doing so.

Water and Power Secretary Imtiaz Qazi said that government was trying to arrange funds to make payment to IPPs in a bid to clear dues stuck due to the inter-corporate circular debt.

The circular debt has financially crippled the energy sector. PSO is owed Rs122 billion dues from different sectors including power sector against payable of Rs 117 billion to fuel suppliers.

Attock Refinery Ltd (ARL), National Refinery Ltd (NRL) and Bosicor have already stopped producing petrol, further exacerbating the problem.

Published in The Express Tribune, June 18th, 2011.


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