Energy crisis: ‘We have a plan, but we don’t know how to pay for it’

Published: October 24, 2011
Email
Committee submits proposal to the cabinet outlining strategy to eliminate loadshedding in 18 months.  PHOTO: FILE/AFP

Committee submits proposal to the cabinet outlining strategy to eliminate loadshedding in 18 months. PHOTO: FILE/AFP

ISLAMABAD: After several weeks of delaying, the cabinet special committee on the energy crisis finally came out with its plan to overcome the chronic power shortages in the country, but did not specify in detail how the government plans to pay for that planned transition towards a more efficient national power system.

At a cabinet meeting held on October 12, the committee outlined its proposals. They claimed that the measures outlined in their plan – which include increasing power production through both new plants as well as increasing efficiency of old ones – will eliminate the power outages across the country within the next 18 months.

On average, most Pakistani cities see eight hours of power outages every day. The committee estimates that those outages cost the economy up to $6 billion a year, or about 3% of the total size of the economy. If the Pakistani economy did not face those losses, it would be one of the fastest growing in the world.

Under the plan, about 5,000 megawatts of power production capacity will be added to the grid over the next year and a half. About 1,000 megawatts will be through improving the efficiency of old plants and about 2,000 megawatts through four new power projects expected to come online in the coming months.

The remaining 2,000 that the government expects to add to the national grid will come from eliminating the inter-corporate circular debt amongst energy companies – a series of outstanding liabilities that begin with the government’s inability to pay its bills and promised subsidies.

The backlog is estimated to be up to Rs300 billion but the government’s plan includes very few details on how it plans on paying for it. The Asian Development Bank had promised to help clear that backlog on the condition that the government introduce structural reforms in the power sector, but the cabinet committee’s proposal makes no mention of the offer.

There were some suggestions of reducing federal disbursements to provincial governments in order to remove the backlog of unpaid bills (most of which are by provincial government departments). However, it is unclear if the government plans on actually moving ahead with that proposal.

There were, however, some innovative proposals in the plan. For instance, the government plans on tackling the politically thorny issue of subsidies by highlighting the amount of cross-subsidy paid by every subscriber on their monthly bill, in the hopes that seeing that amount would outrage them enough to support an end to all subsidies.

Cross subsidies are those where the government charges one segment of the population more in order to subsidise another. For instance, consumers in Azad Jammu and Kashmir pay only 30% of the total cost of production, with the remainder paid by consumers in Islamabad and Rawalpindi. The cabinet committee proposed eliminating all subsidies by June 2012.

In terms of improving the governance of the power sector, the committee put forward once again the recommendation to abolish the Pakistan Electric Power Company (Pepco), the firm set up by the government to handle financial matters in the power sector, an experiment that has largely been acknowledged as a failure.

The state-owned power generation and distribution companies will instead get new management teams that include professionals with industry experience rather than government bureaucrats.

The government also plans on signing performance contracts with every power company in the country by November 2012, requiring them to produce at specified levels of efficiency in order to keep energy costs down.

The committee also recommended establishing the Central Power Purchasing Agency (CPPA) as a trading and settlement hub for all financial transactions in the power sector. The government also wants a significant portion of power-plants in the country to be converted to coal-fired plants over the next two years.

Published in The Express Tribune, October 24th, 2011.

Facebook Conversations

Reader Comments (18)

  • Junaid
    Oct 24, 2011 - 9:20AM

    Plans theoretically is nothing itself if you cannot execute it sir…………..!!!!!Recommend

  • Soomro
    Oct 24, 2011 - 10:15AM

    Himalayas for Solar power prospects?…

    Recommend

  • breitzer
    Oct 24, 2011 - 10:48AM

    Simply you can pay by paying your taxes and reducing the corruption

    Recommend

  • Nasir
    Oct 24, 2011 - 10:56AM

    It is just fooling the people and wasting time. No plan can be made unless expensive oil fired thermal power plants be shifted to coal. Secondly, long term planing on water reservoirs. It is a criminal act of building oil fired power plants in a country that rely on oil imports.Recommend

  • nasim ahmed
    Oct 24, 2011 - 11:39AM

    Look into the statements of Raja parvez ashraf former minister of power,this is no different.Recommend

  • Pundit
    Oct 24, 2011 - 11:40AM

    “On average, most Pakistani cities see eight hours of power outages every day. The committee estimates that those outages cost the economy up to $6 billion a year, or about 3% of the total size of the economy. If the Pakistani economy did not face those losses, it would be one of the fastest growing in the world.”

    If wished were horses , Pakistanis would fly.

    Recommend

  • Pundit
    Oct 24, 2011 - 11:43AM

    “The cabinet committee proposed eliminating all subsidies by June 2012.”

    When are the elections due?

    Recommend

  • Umair Waheed Sheikh, Khayban e Hafiz,IBA Karachi
    Oct 24, 2011 - 12:37PM

    I have a dream although I dont know how to accomplish it.

    Recommend

  • A.Khan
    Oct 24, 2011 - 1:00PM

    Dams are always long term and most stable source of power. Dams are clean and leave no after affects. Why not just focus on dams? The only thing to do would be increasing the number. Dams could be size of very few megawatts upto few hundred megawatts.

    Recommend

  • Pundit
    Oct 24, 2011 - 4:54PM

    Issue 5 candles with the Benazir Card…..

    Recommend

  • Pundit
    Oct 24, 2011 - 5:10PM

    I am sorry but the plan is non optimal.

    “heavy dependence on expensive imported fuel oil for generation (46 per cent of thermal capacity depends on oil), huge imbalance in thermal/hydro (71:29) mix, subsidy of almost Rs2 per unit,”

    Its clear, even to a housewife that any foreign exporter of electricity based on hydro sources, will be cheaper than locally generated fuel based electricity, even after providing for an additional margin.

    Search those countries that can supply and pump the electricity into the grid.

    Best of Luck.

    Recommend

  • Pundit
    Oct 24, 2011 - 5:25PM

    Nowhere does the TET Report mention the Daimer Bhasha Dam, which is budgeted at 12 Mn USD.

    If there is no money for these minor tweaks and modification in the power sector, where will the resources for that thrice inaugurated dam come from?

    Recommend

  • Ali Tanoli
    Oct 24, 2011 - 5:46PM

    Is not it shame Terbela Dam peoples paid whole bills and Fata and kashmir pay 30% of
    its elect bill i dont who made balony in pakistan.

    Recommend

  • Falcon
    Oct 24, 2011 - 6:23PM

    Well…to get funds, govt. needs to collect revenues in the form of taxes…but how can they do it…when their own credibility is questionable!

    Recommend

  • Cautious
    Oct 24, 2011 - 8:10PM

    Nice article – the fact that Pakistan is borderline bankrupt is the elephant in the room that overshadows energy, military, education, etc — it’s time to face the music – it’s time that everyone pay their taxes.

    Recommend

  • Gul Bahadur
    Oct 24, 2011 - 8:21PM

    When your elected members of parliament steal electricity,your WAPDA employees pay only30 Rs per month and your billionaires pay Rs 5000 per month as income tax,there is no way to clear the circular dept.All taxes should be recovered from all these thieves retrospectively and for that you need a very clean leadership.Recommend

  • rehmat
    Oct 25, 2011 - 12:56AM

    @Cautious:
    “Nice article – the fact that Pakistan is borderline bankrupt is the elephant in the room that overshadows energy, military, education, etc”

    Very true. Also impacts transportation ( Pakistan Railways, PIA) and internal security (inadequate investments in police equipment and training)

    Recommend

  • Mirza
    Oct 25, 2011 - 8:08AM

    Most of the budget goes for defense and debt servicing. Freeze those for a couple of years and spend money and nuclear knowhow for the benefit of public. With all the expensive war toys, DHA, golf courses, marriage halls in bases, we can make some cuts in the luxury items, should we desire so. Not a single country in the world with the size of the economy that Pakistan has, can afford this kind of luxuries without sacrificing the essential needs of people. Pakistan as a country has to make the decision, whether they continue eating grass or live honorably like they should and spend the money at the right places and not on the deep state.

    Recommend

More in Pakistan