Voicing concern over annual revenue deficit of $600 million due to inefficiencies in Pakistan’s power sector, the United States has suggested privatisation of power companies in an attempt to improve their operational efficiency.
In an exclusive chat with The Express Tribune, US Agency for International Development (USAID) Programme Office Director for Pakistan John Morgan said USAID had a longstanding relationship with Pakistan in the energy sector.
He underlined the need for fully privatising power companies which would improve efficiency and enhance recoveries. At present, the companies are facing a revenue shortfall due to power theft, slack recovery of bills and technical losses.
Power companies got revenues of $5.5 billion in 2011 with a deficit of $600 million due to system inefficiency.
As different consumers were paying different tariffs for electricity supply, Morgan suggested that every consumer should pay an equal price and subsidy should only be given to lifeline consumers, which consumed 50 units of electricity a month.
He said USAID was working with Pakistan to increase energy supply which would add 1,000 megawatts to the national grid by 2013. Under the programme, USAID will help to build new power plants, rehabilitate existing plants and restore lost capacity of Wapda’s generation companies (Gencos) which were 20 to 30 years old.
Morgan said USAID would provide $280 million to rehabilitate power plants this year and the amount comprised 25 to 30 per cent of the agency’s annual budget for Pakistan.
In the first phase, USAID will focus on three areas which include increasing power supplying capacity, completing Gomal Zam and Satapara Dams and rehabilitating power plants. It will also support the country in replacing some parts of generators at the Tarbela Dam which will improve power supply by 128 megawatts.
In the second phase, the agency will help power distribution companies in bringing down line losses to improve electricity supply as well as revenues.
According to Morgan, USAID has started providing energy-saving devices for the agricultural sector. At present, there are 230,000 tube wells which are running at 30 to 35 per cent efficiency rate. These tube wells will be replaced with efficient machines.
Under a cost-sharing programme with the farmers, USAID has already replaced 1,400 tube wells, leading to saving of 10 megawatts.
In a bid to make the power distribution system more secure and effective, Morgan said the US had provided assistance for technical training of linesmen which would ensure their safety and improve performance of the companies.
He called for reforming the energy policies in such a way that the power system could operate according to US and European standards.
At present, hydropower has a lower percentage in total electricity production because of lack of investment. Morgan was of the view that Pakistan had abundance of water and coal and this potential needed to be further developed. “There should be a balance in use of furnace oil and gas by power companies,” he said.
Published in The Express Tribune, February 15th, 2012.
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@tttt: "so that means 80 % users must be slapped with high bills….wow that is way “forward” "
You are being sarcastic. But yes that IS the only way forward if 80% of the users are being subsidised. The government does not have money to pay for the subsidy. That means the generation companies companies do not have money to pay for fuel. That means there is load shedding because inadequate oil is being imported. Also, no-one will make fresh investments in electricity generation, if they do not have the ability to sell the electricity profitably.
Can any one tell me why US-AID should be given to PAK still for their inefficiencies?
US tax payers have been continually aiding PAK since 1950s in building Indus valley canals, power, roads, social services, food, military and law and order aid, finances, debt forgiveness, aiding PAK when she gets into trouble, scholarships and subsidies for their elites to study in US universities etc.
What does or did PAK do to US in return? A commemorative coin or a simple thank you?
All US got in return were badly made effigies of US senators, terribly made US flags for protests, and xenophobic slogans. Forget OBL; he was a cherry on top of the ice cream that PAK gave to US.
I quote: "subsidy should only be given to lifeline consumers, which consumed 50 units of electricity a month." so that means 80 % users must be slapped with high bills....wow that is way "forward"
US doesnt get it. Pakistan is not US. In the US, there are even laws of gravitation, laws of thermodynamics, laws of supply and demand. In Pakistan, we dont have these laws. So no one follows the laws of gravity or thermodynamics or economic. SARCASM
Thankyou US for stating the obvious. We already know that our power companies need to be privatized, in fact we did try to do it just a few months ago. It was a catastrophe! Protests all over Pakistan. Load-shedding sky-rocketed.
Everyone knows what needs to be done but no one knows how to make those who are supposed to be doing it, do it. Simpler way to say it is : Without a will there is no way.
Instead of giving money to armed forces this is the correct way of spending US Aid which would benefit a commoner & bring good will for Americans.
Pl get back to China......let them invest. Use pre paid electricity , it's even practiced in 3 rd World e.g. Sudan. Buy and use ! No theft ...
@Cautious: Similar model is followed by western Europe too.
Maryam should get a nobel prize for such a splendid view!!
Where is all weather friend in investment?
So privatize one of the most revenue making sector and put it in plate for US corporations? Really? Do we need an Occupy Islamabad Stock Exchange like Occupy Wall Street?
Their corporations are getting a beating out of every corner of the world so much they are heading to the north pole for oil and gas.....thanks but, no thanks uncle Sam!
The KESC has been privatized and yet Karachi has the highest rates of electricity theft in the entire country! Pakistan is not USA. The US model doesn't work in Pakistan. Even a privatized business has to deal with consumers who can turn violent at any time. That's what happens when you try to take down stolen connections. The entire area erupts in violence.
Also the problem in Pakistan is circular debt not lack of generation capacity. You can't solve the circular debt by privatizing the power companies. The circular debt can only be solved once the govt. starts paying its bills. That's not likely to happen any time soon.
US power plants are owned by private industries - rates structures vary but many are govt regulated and based on cost plus a reasonable return - systems not perfect but it's a major step up from what Pakistan uses. If you don't pay your utility bill in the USA you don't get service - that alone will be a nice improvement for Pakistan.