The circular debt has put off potential investment in the power sector because investors have serious doubts that they will get their investment back. ILLUSTRATION: JAMAL KHURSHID
The energy bill for the year 2012 was $14 billion, and if things continue the way they have been for the past five years, with the same policies, it will have jumped to $50 billion by the year 2020. This is a number that is not only astronomical; quite frankly, it is a number that Pakistan simply cannot afford to pay.
According a study conducted by Engro Corporation, if the government does not make tough calls and avoid making populist decisions like it has up till now, the country will not be able to avoid bankruptcy in the years to come.
As it is, the circular debt has put off potential investment in the power sector because investors have serious doubts that they will get their investment back. Foreign investors are slightly more willing to work with the KESC but not make any investments into the national grid, which us why the power crisis has been going from bad to worse.
Engro Corporation CEO Ali Ansari, while speaking at a press meet, said the government will have to start power sector reforms on an immediate basis, otherwise any investment into the power sector, be it in the form of LNG imports will simply add to the circular debt. He also stressed that
Ansari also said that more important than any strategic plan to solve the power crisis is the political will to take unpopular decisions. The most unpopular of which will have to be a complete ban on power subsidy, on gas to the CNG sector and on gas for captive power generation. He also recommended a 12% increase in power tariffs across the board as the only way to do away with the circular debt.
Life for a lot of people – in a country where we still pay less for gas on average then we do for cable TV and internet – will change drastically.
Thar coal, only way to go
Shamsuddin Shaikh, CEO of Sindh Engro Coal Mining Company, while admitting that his company had a stake in the sector, said that this stake notwithstanding, by any logical and sane calculation, the country would be wise to make use of Thar Coal as a lifeline to get out of the power crisis.
He said that based on estimates and verifiable reserves just 1% of Thar Coal was equivalent to the total existing gas reserves of the country and that the strategy should involve conversion of all furnance-oil based plants to coal, and that all future power plants should be coal based.
But the question everyone asks is how soon will the country be able to start using Thar Coal, and it won’t exactly be very soon. If all goes according to plan, and things pan out the way the stakeholders want, then we will see the first power generation out of the Thar field in about two and a half years. And it won’t be a lot, to start off with, with production increasing sequentially to about 600MW in the first stage.
That is really not going to make any sort of dent on the power shortage - just yet - but this is the way to go in the long run. And considering that the government sells electricity right now at about 8.3 cents per KwH, with generation cost is about 5 cents higher, the 7.5 cents that it will cost to produce power from Thar coal will effectively remove the need for any subsidy.
Admittedly hydropower is also a very cheap source, said Ali Ansari, and dams will also help us alleviate our water needs but the time it will take to reach a political consensus, is time that the country no longer has.
Published in The Express Tribune, June 1st, 2013.
Like Business on Facebook to stay informed and join in the conversation.
COMMENTS (7)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
Stop corruption to solve power & energy crisis. Increasing tariff would not help.
@Salwa: Initial capital investment for new hydropower projects is prohibitively expensive even for relatively wealthy countries let alone for Pakistan. For Pakistan, to overcome the existing shortfall in electricity production while also accounting for future increases in demand, you need a bare minimum initial investment to the tune of $30 billion and it certainly won't be a one time thing, you'll need to invest just as much another 5 years down the line and so on. Another issue with hydropower is that the required resources are concentrated in KP and Gilgit Baltistan. KP has been very protectionist with it's resources and it has(rightly) diverted all the power it generates to within it's borders (which I support. Punjab has leached off of us for too long whilst giving back such great gifts as religious extremism, outright terrorism and a) which means that the rest of the country won't see much benefit from power generated in KP. You can't get financing for Gilgit Baltistan projects from international sources as seen recently during the diamer-bhasha fiasco with the ADB so GB projects are a non starter.
Thar coal has it's own issues. You don't have the water resources to mine it on a large scale, it can't be transported since (a) the particular kind of coal found there is very prone to spontaneous combustion and (b) there is no rail infrastructure there which limits power production to within the vicinity of the reserves.
With Asad Umar's plans of catapulting into Pakistani politics, Engro is set to increase its business with the Thar coal recipe. Any matric pass could tell that converting the 80pc fossil fuel based plants to coal is gonna take a while, plus the impracticality of Dr Nuclears UCG project. Next up, Engro will support water cars and piezoelectric devices! Why? To make up for lost profits on the fertilizer misadventures.
We need to focus on hydropower, no coal no renewables for now!
It is pointed out that there is a clash and a vested interest....."Shamsuddin Shaikh, CEO of Sindh Engro Coal Mining Company, while admitting that his company had a stake in the sector, said that this stake notwithstanding, by any logical and sane calculation, the country would be wise to make use of Thar Coal as a lifeline to get out of the power crisis."
i pay 1500 for my broad band and 300 for gas per month.
@Nadir: do u have any other source?
How about highlighting the obvious clash of interests that Engro is a partner in developing Thar coal and is also providing "research" to support why its the only commercial choice.