WB suggests enhanced gas supply to power plants

Says project loans depend on provision of gas to electricity producers.

ISLAMABAD:

The World Bank has asked Pakistan that it should enhance gas supply to power plants to pave the way for loans to power projects and reduce mounting circular debt, a suggestion that comes at a time when the government is diverting gas from power producers to industrial units.

A World Bank mission, during a visit to Pakistan, asked the authorities to provide more gas to the power producers, which would reduce generation cost and curtail circular debt that had again swelled to Rs225 billion, sources say.

If gas supply is increased, the country will also qualify for World Bank’s project loans for power plants.



The International Monetary Fund (IMF) had also pressed for boosting gas production in the country. In response, the government assured the lender that it would add 200 million cubic feet per day (mmcfd) to the national grid by the end of December this year, but the plan seemed to have fallen through.

According to sources, the World Bank has also asked Pakistan to phase out power subsidies. The government has already raised power tariff for domestic and other consumers, but the bank wants to see more tariff increase or enhanced gas supplies to power plants to slash the generation cost.

Independent Power Producers (IPPs) Advisory Committee Chairman Abdullah Yousuf told The Express Tribune that inter-corporate debt of the power sector stood at Rs225 billion, of which IPPs had to receive Rs150 billion.

He claimed that four power plants had been forced to stop operations because of absence of gas as the Economic Coordination Committee (ECC) diverted supplies from Rosh Power Plant to the industrial units. “Now, gas-fired power plants have almost been shut down.”

He cautioned that very soon hydroelectric power generation would come down to 1,000 megawatts compared to existing 3,500MW due to closure of canals for annual maintenance. In this situation, the government would be forced to operate gas-fired plants on high speed diesel, leading to further piling up of circular debt.

Acknowledging the government’s efforts to curtail the circular debt by increasing power tariffs whose impact would be reflected later, he said this was only a single step and some other measures were needed to arrest the rising debt.

He cited slow bill recoveries and high power losses, saying the government had not undertaken significant steps and failed to stop the circular debt from growing.

According to sources, state-run oil marketing giant, Pakistan State Oil, is in trouble as its receivables from different sectors including power plants have surged to Rs139 billion. Of this, Wapda owes Rs81.46 billion, Hubco Rs28.6 billion, PIA Rs7.12 billion and KESC Rs9.9 billion.

Published in The Express Tribune, December 19^th, 2013.

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