Power crisis: Ban on subsidies, increase in power tariff only salvation
Country cannot afford luxuries like gas for captive power generation.
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
KARACHI:
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.
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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.