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Tuesday, April 27, 2010

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Belated but corrected

Dr Ashfaque H Khan Prime Minister Syed Yousuf Raza Gilani announced some short-term measures to conserve electricity as finalised by the participants of the two-day energy summit. The four-pronged measures included immediate, short-term, medium- and long-term solutions to address the worsening energy situation in the country. These measures, if implemented properly, can reduce the unscheduled load-shedding by 30 per cent. The immediate measures include: fiveday working week; closure of business by 8:00 pm; 50 per cent reduction of power lights in government buildings; all street lights to be halved; power to billboards, neon signs and commercial decorative lights to be cut off; staggered weekly holidays for industrial units will release about 300 mmcfd of gas supply to power plants; marriage halls will be allowed to operate for only three hours, etc. These measures will save, as announced, some 1500MW of electricity. The short-term measures would add 300MW of electricity to the system while by the end of the year, 1300MW would be added by making ten IPPs operational by providing them fuel. In order to resolve the circular debt issue the government would release Rs116 billion which would enable the IPPs to utilise their excess capacity and add electricity to the system. The government also intends to add 605MW in the system through the rental power projects. These measures, though belated, are steps in the right direction and if implemented properly, will not only save power and hence reduce load-shedding but will also reduce fuel import with positive implications for balance of payments. Such measures were badly needed to conserve power and reduce fuel import bill. It is in this perspective that I had proposed a series of measures in the ECC meeting held on July 1, 2008 in Karachi under the chairmanship of the prime minister. While I was presenting measures to conserve fuel and power in the larger interest of the economy of Pakistan, the prime minister was smiling sarcastically as if I was speaking Greek. Several federal secretaries attending the meeting noted with concern the attitude of the prime minister. Two of them later asked me to continue to present these measures in every forum as these were the only short-term solutions. They said to me, "Today the prime minister is smiling sarcastically; tomorrow there will be tears in his eyes and he will be doing the same things that you proposed in the ECC meeting." How correct was the observation of those two federal secretaries. After almost two years, the prime minister announced almost the measures that I had presented in the ECC. Following the advice of those secretaries I continued to present the case before the Daily Economic Monitoring Committee headed by Mr Naveed Qamar. The committee assigned me the responsibility to suggest measures for fuel and power conservation. The ministry of petroleum and natural resources were asked to produce gas load management formula. These measures were discussed in the committee several times but unfortunately no actions were taken. The large-scale riots and demonstration in different parts of the country on account of unscheduled, massive load-shedding forced the government to take measures. Had the prime minister taken the measures which were suggested on July 1, 2008 in Karachi seriously, the country would have avoided such riots and demonstrations and the government would not have lost its popularity. Hence, it is better late than never. Let me say a few words on the current power crisis. The current total installed capacity is about 20,000MW. The production of electricity is approximately 75 per cent of the installed capacity in any given time. Some installed capacity (25 per cent) is always used as reserve. Thus, the country can produce 15,000MW at any time. The demand on the other hand is also 15,000MW but the production is ranging between 10,000 to 10,500MW, leading to a gap of 4500 5000MW. Thus, if the country could produce at its capacity, there would not be any shortfall and hence no load-shedding.

But then why there is a large-scale load-shedding going on in the country? A variety of factors are responsible for the massive load-shedding. First, PEPCO can produce 6000MW of electricity from hydel but due to shortage of water in reservoir it produces slightly above 2200MW. With the rise in temperature snow will melt on the mountain and water will flow into the reservoir leading to the increase in the generation of electricity through hydel. The non-availability of adequate gas for power generation has also forced many IPPs to produce electricity less than their capacity. If the government ensures gas supply, (it has been announced by the Prime Minister) the power supply will improve by 950MW. There are some IPPs who have closed their operations either for security reasons or for lack of fuel. If their issues are resolved, some 300MW power can be added to the system. The issue of circular debt has also played an important role in creating shortage of electricity. The prime minister has announced that the government will release Rs116 billion to settle this issue once and for all. This will also increase the supply of electricity to the system. Thus the current crisis in power sector is the result of less water available in the reservoirs; nonavailability of adequate gas for power sector, security environment and circular debt. These issues are not insurmountable and hence the shortfall in power can be minimised. One thing is crystal clear. The capacity to meet the power demand does exist in the country. Resolving the above-mentioned issues can reduce load-shedding significantly.

The writer is director general and dean at NUST Business School, Islamabad. Email: ahkhan@nbs.edu.pk

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