As of this Monday, total power generation was 9,000 MW against a demand of 16,000MW, creating a shortfall of 7,000 MW, and a power crisis of unparalleled proportions. PHOTO: AFP
Despite having voted in the elections — dealing severe blows to many a party and politician while giving a fresh mandate to others — the people of Pakistan remain quite literally powerless.
During the scorching days of summer, they are forced to sweat it out, whether at home, in offices or even in emergency wards. This is the reality of Pakistan’s prolonged — and worst ever — power crisis.
At the moment, Punjab receives around 68 per cent of total power generation, while the remaining is being distributed among the other provinces. As of this Monday, total power generation was 9,000 megawatts (MW) against a demand of 16,000MW. That means a shortfall of 7,000 MW, and a power crisis of unparalleled proportions.
The shortfall is resulting in frequent power outages across the country. For instance, urban centres of Khyber-Pakhtunkhwa are made to go without electricity for up to 12 hours a day. The situation in rural areas is worse where consumers are subjected to up to 20 hours of load-shedding.
The situation in Punjab is not good either. On Monday, Sialkot district and its adjoining areas spent 22 hours without electricity. The Gujranwala Electric Power Supply Company, which is responsible for supplying electricity to the region, blamed Wapda for the power outages.
A vicious circle
Power plants require gas and furnace oil to operate. The main oil supplier: Pakistan State Oil (PSO) has no money to inject and has defaulted at least ten times to international fuel suppliers in 2012 due to a liquidity crunch.
The previous government left behind a circular debt of over Rs500 billion, leading to a shortage of fuel which in turn caused a 7,000MW shortfall, causing unbearable levels of load-shedding.
The main fault lies with the power sector, which is unable to collect bills from many consumers but is forced to continue supply to defaulters due to political pressures.
According to sources, during the ongoing financial year 2012-13, Pakistan State Oil (PSO) was paid Rs369 billion for fuel supply, of which Pakistan Electric Power Company (Pepco) gave only Rs50 billion. The shortfall was paid by the finance ministry.
The water and power ministry had asked the finance ministry to arrange Rs105 billion to provide fuel for power plants for April to June 2013. Instead, the finance ministry released Rs30 billion in April and Rs10 billion in May, against the requirement of Rs35 billion. This led to a shortage of furnace oil for power generation.
The gas gangs
Thanks to a gas shortage, power plants mainly rely on furnace oil, and when that supply is cut off, power shortages take place. “At present, the government needs to inject Rs55 billion every month into the power sector to pay for fuel to operate plants at full capacity,” officials said, adding that many power plants had been deprived of gas due to the powerful compressed natural gas (CNG)and fertiliser industry lobbies.
Lobbying by CNG and fertiliser sectors resulted in more than 600 million cubic feet per day (mmcfd) being diverted from the power plants to those sectors, resulting in a jump in the cost of electricity production.
The gas being diverted is from the power plants owned by state-owned power generation companies. These companies need about 735 mmcfd to run their plants, but during the 2011 the maximum amount they have received on any given day has been 300 mmcfd.
These power plants were forced to shift to furnace oil, the prices of which have jumped 72% over the past few years. This policy has also affected the power plants capable of producing about 3,000MW, or over one-quarter of the country’s power supply.
“The gap between the notified power price and the cost of production has gone up by 40%. At present, the government is charging Rs8.87 per unit from consumers against the average power price of Rs11.90 per unit,” said an official of the water and power ministry.
And it’s not getting any better
With the elections over and done with, the water and power ministry says fuel supply has been reduced from 19,000 metric tons/day to 10,000 tons. Gas supply has also declined to 75 mmcfd to four power plants with a 8,000MW generation capacity, which were previously supplied 150 mmcfd. They’re the lucky ones, comparatively.
An official of the power ministry said the power plants with a 4,000MW capacity were shut down due to fuel shortages, and that Hubco and Kapco were not operating on full capacity.
A PSO official said the liquidity crunch had choked their Letters of Credit to the extent that they did not have enough furnace oil to pump into the power sector.
The ministry of petroleum had warned the finance and water and power ministries to arrange funds in a letter sent on May 10. But these two ministries did not arrange the money and the power crisis worsened.
Mismanagement adds to miseries
Financial constraints aren’t the only reason for the crisis.
The interference of the federal government, which forced oil and gas companies to continue supplies despite the default of the power sector, has been a major reason behind the collapse of energy companies.
Petroleum ministry officials said that oil and gas firms were supplying fuel to the power sector, along with other clients, in violation of supply agreements.
Also, there are ad hoc heads supervising power firms who have contributed to their inefficiency. At present, ad hoc arrangements had been made to operate Pepco, NTDC and other power distribution companies.
The former government also empowered gas utilities to manage load shedding on their own. Previously, the Economic Coordination Committee (ECC) and cabinet used to approve the gas load management plan but now gas companies are reportedly involved in giving gas through commissions, and therefore no gas was being provided to power plants. This is a gross violation of the ECC, which had placed power sector on second priority after domestic consumers.
Under a short term plan, government should divert gas from inefficient captive power plants to Independent Power Plants (IPPs). This would help to generate 5,000MW power which would not only be cheaper, but will also result in continued power supply.
The gas supplied to CNG firms could also be diverted to operate those power plants which were shut down due to a shortage of gas. It’s now time for our economic managers to start burning the midnight oil so that the rest of the country can keep its lights on.
Published in The Express Tribune, May 21st, 2013.
COMMENTS (26)
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All problems CAN be solved but short term solutions are not on the anvil.IF the government and people work with sincerity and urgency to resolve the underlying root causes, it can be resolved in 3-4 years because of the complexity of the issues involved.
@Mango Man: "FDI in Solar power generation : Engage Chinese Solar companies to setup farms in the desert with a Guaranteed Power purchase agreement, thus bring in FDI in to power generation"
The solution you propose could have worked 10 years back. But credibility of Pakistan government guarantees is low (Ask Engro who made a billion dollar worth of investment on promise of assured gas supply - a promise that has mostly been observed in breach). Moreover no one can guarantee that your activist courts will not overturn the agreement after the investments have already been made - sometimes decades later (RPP, Reko Diq come to mind).
@Waqar: Technically you are correct but solar power is highly capital intensive and there simply is no surplus capital available within Pakistan. Given Pakistan's activist judges, law and order situation at this time flow of foreign capital has dried up. When it comes to invesments in energy sector, there is one more issue i.e. circular debt which would prevent foreigners from investing.
What about if we use the wind energy? nobody is talking about using this system.. I know the capital cost will be a more but output will be cheap.
Concentrated Solar Power (CSP) solar-thermal applications can easily solve this crisis, based on the model of UAE, Spain, Morocco, and Gujrat, India. Pakistan has some of the highest solar energy levels in the world. Sindh can be effectively utilised for this purpose.
However, the intellectual midgets that happen to rule the roost in the Land of the Pure will see to it that nothing of the sort comes to fruition.
Energy crisis in Pakistan are biggest issue these days. Many hours of load-shedding daily is not only disturbing the life of a normal man but also is destroying the industries of Pakistan
If you are not going to catch the power thieves and recover the loss and fix your own problems...then sell the country to the highest bidder so someone from outside can come and fix these issues....otherwise I do not see this issue being resolved...EVER!
FDI in Solar power generation : Engage Chinese Solar companies to setup farms in the desert with a Guaranteed Power purchase agreement, thus bring in FDI in to power generation. The govt needs to guarantee payments by the distribution companies, though. This is the shortest and best available option, in the given circumstances
How many dams do we required to overcome such crises..
and in my view PML-N is equally responsible for this crises. they have not done anything to overcome such issues during last 5 year. infact they have not done anything in their last 2 tenures
@GIndian: "Chinese have excess capital to spend."
No one has 'excess capital' when the turn on capital cannot be ensured due to the well known and dpcumented circular debt problem.
@numbersnumbers: "Missing from the article is any discussion on the addition of electrical generating capacity (or the lack of additional capacity!)"
needs 16000 MW electricity in summers. ITs installed capacity is 21,000 MW. Even after line losses, the issue is not the generating capacity, it is the money to pay for electricity and forex to pay for the fuel.
wow..! great compilation for the common man.
@Humayun: WAPDA Colonies, Mangla Cantt, Tarbela, Bilawal house, Raiwand Nawaz house, and many many more.......
Excellent article and research. This was something I wanted to learn about for a long time now.
ET mods: please allow response to someone who has written to me. @A. Khan: The things you are suggesting are necessary but not sufficient. Why? There are. 2 separate problems that are contributing to the load shedding. One is the circular debt and the lack of fiscal space with the federal government to subsidies the sector on an open ended basis. This issue can be resolved using the solution you suggest. The second problem is the balance of payment crisis I.e. not enough forex to import fuel to be able to run he power plants optimally. It is unclear how you propose o address that issue without going to IMF.
Time to think about solar lantern, solar fan, solar water pump etc.
Think about solar panels that cover the whole area of Thar desert. Such an installation can meet the entire electricity need of Pakistan. Solar power is capital intensive, but Chinese have excess capital to spend. Solar power doesn't require much running cost. Once installed it can theoretically run for ever.
Clearly the people above don't pay their electricity bills. That's why we have loadshedding like those cheapskates who can afford a Lexus LX + 100% but pay bribes to eletric officials and never pay their honest bill.
Is the power shortage related also to award of contract to Independent Power Producers who were given contract at a very high rate of tarrif?
Missing from the article is any discussion on the addition of electrical generating capacity (or the lack of additional capacity!) in the form of hydro electric generation, thermal plants, wind power, etc etc! This "power crisis" will not be resolved until Pakistan can generate (or acquire from other countries) all the electrical energy it needs to avoid "loadshedding"!
Most of the Fertilizer plants on the SNGPL network have been closed for the six months what are guys talking about? IPPs actual not running because they are not paid. When will the power thieves be caught rather then closing Pakistan industry?
A good excuse to put more pressure on common man in the coming budget......????
@go65 : Why go to IMF or World Bank and begging for more ? We as a nation are no different from the traffic light beggars who have a sob story ? Think of your sitting in the car as the World Bank or IMF or any Western Country.
Why not try and collect the money from the defaulters. I have lived in the west and the system there is that any late payment after a grace period is subject to interest payment based on an interest and the number of days the payment is late. Some companies do not even waste time chasing defaulters, they take a monetary hit and sell the uncollected bills to debt collection agencies. These chase the defaulters and have the power to attach a lien to any property owned by the defaulter. They can also take it away and auction it off to recover the funds. I don't see why we cannot have the same in Pakistan.
Shabaz sharif promised that power crises can be resolved in 6 months during election campain....and i just heard Nawaz sharif saying he cannot give any deadline for the resolution of power crises....enjoy
Did the President House, PM House, Governor House, CM House, COAS House, IG House, Chief Secretary House, MNA / MPA Hostels also had the power outage ?
Extremely disappointing !
Problem of non recovery of electricity bills resulting in liquidity crisis .Problem is known / identified to reduce the energy crisis but who is going to solve the problem of will power to tackle the issue. Power production through furnace oil will always be costlier and create hindrance in economic growth.
I hope Nawaz reduces power LS to half withing first month :) and then get rid of LS alltogether within 2 years.
The current load shedding is directly associated with the balance of payment crisis in addition to the well worn circular debt issue. There simply is not enough forex to buy necessary fuel to keep the power plants running at optimal capacity. People hate the power crisis but also want to avoid going to IMF? Well, you cannot make an omelette without cracking a couple of eggs.
Just do it.........No more delay for new afforable Power Generation.....