Hypocrisy on Karachi’s electricity

Published: February 6, 2015
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The writer is a graduate student at 
the University of Notre Dame in the United States

The writer is a graduate student at the University of Notre Dame in the United States

It is bad enough that the Nawaz Administration is so beholden to the textile lobby that it would rather leave all of Punjab in darkness than force its friends to pay a little extra for their electricity bills. But the cynicism of blaming Karachi’s electricity supply for somehow being responsible for painful power outages in Punjab is simply unforgivable.

Let us start with an overview of the facts. K-Electric, the only electric utility in Pakistan that is mercifully not owned by the government, had an agreement with the state-owned National Transmission and Dispatch Company (NTDC) to buy 650 megawatts (MW) of electricity from the national grid at the same subsidised price at which the NTDC sells power to every other part of the country. That contract expired on January 26 and now the NTDC is trying to get out of renewing it, arguing that it is unfair of K-Electric to continue buying electricity from the grid when it is not even using its own power generation capacity to the fullest. It also argues that the 650MW could be diverted towards Punjab to help alleviate that province’s electricity shortage.

It is true that K-Electric has a power generation capacity of nearly 2,500MW and the demand in Karachi usually does not exceed that level. So why bother continuing? Why not end the dispute by ending the NTDC contract and ramping up local power generation in Karachi?

Because many of the older plants owned by K-Electric run on furnace oil, which is one of the most expensive ways to produce electricity. Most of those plants can be converted to natural gas, which is a much cheaper source of energy, but herein is where K-Electric runs into its problem. The government-owned Sui Southern Gas Company, which is contractually obligated to provide K-Electric with over 270 million cubic feet per day (mmcfd) of gas, rarely ever meets that target, often supplying up to 100mmcfd less than it should.

Why does the government not supply K-Electric with that gas? After all, would that not solve both Karachi and Punjab’s problem? Yes, it would. But it would mildly inconvenience the textile lobby in both Karachi and Punjab, which is apparently a big no-no to all governments in Pakistan — be they military or democratic, right-wing or left-wing.

Electricity costs constitute approximately three per cent of the total cost base of most of the large textile firms that can afford to have their own gas-fired power plants. Were they to shift from their own plants to the grid, their overall costs would go up by less than one per cent, but they would rather push all of Pakistan into darkness than see their costs rise by that measly one per cent. So the government, beholden as it is to the textile lobby, continues to supply it with natural gas at the expense of the power companies, favouring larger, more powerful companies over smaller ones.

And so, rather than provide K-Electric with the gas it needs to solve the whole problem, the government accuses the one company competently running an electricity grid in Pakistan of avarice, blaming its insistence on renewing the NTDC contract for Punjab’s electricity problem.

Here is the part that the Nawaz Administration leaves out: while accusing K-Electric of using up 650MW of electricity from the national grid to keep its costs down, the government is refusing to turn on power plants in Punjab that can collectively produce 6,378MW for the exact same reason. Karachi’s textile companies are not the only greedy ones. So are those in Punjab and there are a lot more of them there.

Shutting down the NTDC supply to Karachi would hurt the city very badly. But it would do absolutely nothing to solve Punjab’s electricity problem. This is not a government taking action against a greedy utility company. This is a government failing to stand up to the country’s most powerful industrial lobby and then disguising that with a cheap ‘divide and rule’ tactic. Punjab is not dark because Karachi has lights. It is dark because our ruling elite have chosen craven self-interest over the greater good.

Published in The Express Tribune, February 6th, 2015.

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Reader Comments (15)

  • Asif
    Feb 6, 2015 - 2:51AM

    a good analysis with reasoning!

    Recommend

  • Zain
    Feb 6, 2015 - 2:55AM

    K-Electric/KESC has been in private hands for over a decade. In that time, it could not convert it’s generation to coal or any third fuel source?

    K-Electric’s T&D losses are almost twice that of any of the five DISCOs in Punjab.

    K-Electric’s bill recovery is almost 20% lower than the worst performing DISCO in Punjab.

    IESCO, GEPCO, LESCO, FESCO and MEPCO outperform K-Electric in every aspect. Why should K-Electric get guaranteed supply of electricity at a higher level than those five? What crime have bill paying Punjabis done to get less electricity than Karachiites?

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  • John B
    Feb 6, 2015 - 3:24AM

    Correction:

    “furnace oil ….is one of the most expensive ways to produce electricity…. compared to natural gas, which is a much cheaper source of energy”

    This is scientifically inaccurate. The calorific value (the energy released) by furnace oil hydrocarbons are greater than those released from natural gas hydrocarbons. Consequently, the price per unit energy released and converted to electricity is much cheaper in liquid hydrocarbons compared to gaseous ones.

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  • Feb 6, 2015 - 8:23AM

    John B, the calorific value is only one component of determining cost. The other is price per mmBtu, which has historically been much higher for oil than for gas.

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  • ali
    Feb 6, 2015 - 9:13AM

    @Zain:
    Do you even have sources for what youre claiming.
    KESC has one of the highest billing recovery in the country and its high enough to result in a profit for the company for the last 2 company.Other than KESC show a DISCO which has been in profit in the last decade,you will find none
    The billing recovery and power management system has improved to a level that KESC has a Harvard business school case study based on how its operated.It sure has its issues but comparing it to other distribution companies youll see all of them with subpar performance relative to KESC

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  • John B
    Feb 6, 2015 - 9:57AM

    @Farooq Tirmizi:
    Thank you for correcting. Pricing structure is hard to understand. Here is a summary of fuel price cost delivered to US electric utilities. Hope it is useful in your research.

    http://www.eia.gov/electricity/cost_quality/pdf/cqa2009.pdf

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  • Barozgar_Pakistani
    Feb 6, 2015 - 10:01AM

    I seriously need to get into the textile industry. So much money is being made in this. It’s quite surprising people can be made millionaire in a absolute dirt poor country. This article needs to get more heat.

    Recommend

  • Adil
    Feb 6, 2015 - 11:10AM

    Zain, perhaps you should do some research before blatantly throwing accusations…
    The coal conversion project at BQPS-I is still pending the go-ahead from NEPRA (govt body), it will result in cheaper electricity for the masses, the intl investors are waiting, yet the govt continues to stall it.

    As far as your stats claiming DISCO’s in Punjab are better than the one in Karachi, well let’s be honest, who’re you (or the NEPRA report) trying to fool …

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  • Parvez
    Feb 6, 2015 - 1:30PM

    Well said……..and very true.

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  • Muhammad Abdul Rehman
    Feb 6, 2015 - 4:17PM

    Sir,

    Why government will subsidize KE, when they are charging more? I agree with your point that gas is cheap than furnance oil. But don’t you think that this cost difference should also be passed to people. They are taking subsidized electricity from government and rest producing from gas and charging people with the rate of petrol + unlimited profit.

    KE claims that they are facing electricity theft and had a profit of 7 billion last year…. Isn’t amazing. Can anyone define this in any sense, as the profit is huge.

    Thanks,

    Rehman

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  • Nayyer Hussaini Ismail
    Feb 6, 2015 - 5:23PM

    All citizens of PK has equal rights on subsidized power from national grid similar to when KHI shares the costs of fuel transportation for central & northern part. If Gov will deprive KHI of this right then it should better deregulate fuel mkt as well ..,Having said all this KE has indeed improved utility service levels in KHI but at a high costs to innocent consumers via over billing, forced meter changes, penalties etc. What is taking so long for KE to develop its Coal projects when they know that their RFO plants are inefficient/expensive and cheap indigenous gas is just not available anymore? Its pure incompetence on their part and criminal negligence as its been over 5 years now and nothing in on the ground. They should have invested by now in at least 600MWe+ Coal Generation. This fight is not new and we will surely see this convert into another issue to divide the country further and hife the incompetence on both sides i.e. GoP AND KE, Both are to be blamed equally for this !!

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  • Chachoo
    Feb 6, 2015 - 7:17PM

    @Nayyer Hussaini Ismail: When did Karachi start sharing any price of Fuel supplies?. Rather Karachi port trust charges extra for those trucks that leave for inner Pakistan. Also one Political party members make sure to get their share on every consignment for your information. Every Businessman from Punjab and KP is forced to hire a Clearing Agent ( Aka Political party affiliated thug ) in Karachi that dont allow us to be competent as they blackmail us at every level. Clearing agent blackmail every exporter from Punjab and even many consignments get lost if One Political party is not given the due share ( Commonly known as Bhatta ).

    Also Pakistan is not a free state that anyone should get subsidized electricity. NTDC charges full fee for every unit from Punjab and Karachi should pay the same. Moreover your beloved Musharraf privatized KESC and no subsidy should be extended to any private company.

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  • Nayyer Hussaini Ismail
    Feb 6, 2015 - 9:32PM

    @Chachoo: Brother/Sister get your facts right … its also common sense if u see the pricing of petrol/diesel. KHI does pay for the upcountry transportation costs of all fuels as the total cost of transportation gets divided over the total consumption/import and notified by OGRA. If that was not the case then fuel should be cheaper in KHI relative to North as in the case of deregulated mkts like US/Canada/EU or Port Cities. We all should now be paying our due share of taxes, be it for fuel/water/gas/electricity.
    Port charges goes to national exchequer or gov kitty not into pockets of KHI FYI … and even business in KHI/Sindh has to pay port charges and clearing fee by the way. Kindly do not make stupid comments which spread further hatred among Pakistanis. Yes I agree law & order situation is worst in KHI which we have to address that … and NTDC does not charge full electricity charges from Punjab consumers … thats why IMF dictates GoP to reduce subsidy which is widely known issue. ALREADY THR IS SO MUCH DIVIDE SO PLZ DO NOT SPREAD FURTHER HATRED BY MAKING ILL-INFORMED SWEEPING STATEMENTS.

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  • Chachoo
    Feb 6, 2015 - 11:36PM

    @Nayyer Hussaini Ismail: You are pretty misinformed on many fronts. Do you know Prices of energy items vary in the entire country.? The price parity varies from one-two rupees given where you are in the country. The gas is cheapest in Sindh while it is the most expensive in North Punjab. CNG, Petrol and every price varies. Kindly update yourself. CNG-Region 1 has the highest gas prices in the whole of Pakistan. It is not the Government but the Oil Marketing companies (OMCs) set the Margin on transportation for your information. The margin on high speed diesel (HSD) currently stood at Rs1.90 per litre and it is upto dealer to charge it based on transportation costs..

    Also I would suggest you to settle in Punjab and then try to do any Import ,export business. The political party to clearing agent involvement will be evident then.
    Regarding to the so called subsidy you are talking about is actually for those people who use less than 100 units and that subsidy is being generated by overcharging industrial units in the same region. That is why Commercial and Private units prices are different.
    So educate yourself and then comment kindly.

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  • Umair
    Feb 7, 2015 - 12:37AM

    @John B:
    You are right in comparing the two sources, but the context of author here is that gas (local product) is much cheaper as compare to oil (as we are importing oil for fulfilling our needs from international market)

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