A must read for the PM Pakistan Prof. Ahsan Iqbal and all the wise men and women of the cabinet
A must read for the PM Pakistan, Prof. Ahsan Iqbal and the entire cabinet of wise men and women
“Power policy”
By Dr Farrukh Saleem
Sunday, July 28, 2013
From Print Edition of the daily “The News”.
Capital suggestion
Thirty percent of the new power policy makes sense. Seventy percent of the new power policy is poppycock. The PML-N wants to deliver. Delivery has three pre-requisites: intention, planning and capacity to implement. The PML-N seems well intentioned and is engaged in some sort of planning as well. In my analysis, capacity is the missing link.
Here’s the sensible part of the policy: smart feeders, re-prioritisation of gas allocation, furnace oil priority for efficient plants and performance contracts with Discos. Furthermore, holding the board of directors responsible, energy-saving bulbs and decentralisation are all steps in the right direction. Other sensible elements include a federal adjuster, external collection agencies, prepaid meters, key client managers and time-of-day metering.
Now the poppycock. We will convert to coal. Imagine: we would need 100,000 tons of coal a day while our current production is 8,000 tons. Realistically, Thar coal will need five to eight years plus a few billion dollars. Time we don’t have, billions we don’t have.
Lo and behold, the power policy does not talk about the two elephants in our power sector. First, our IPPs are running some of the most inefficient power plants on the face of the planet. Second, the government has already resolved to jack up the tariff. The truth is that Pakistan’s IPPs have no incentive to become efficient and Pakistan’s IPPs are massively over billing – and still getting paid.
More poppycock. We will import coal. Imagine: we need to import 100,000 tons a day while our ports are currently handling 6,000 tons a day. Plus, a multibillion dollar logistical and supply-chain infrastructure to transport all that imported coal to the power plants day-in-day-out. Time we don’t have, billions we don’t have.
Even more poppycock: the China connection. The truth is that China is converting its own coal plants to LNG and the truth is that the world outside China is no longer willing to finance coal plants.
Amazingly, the power policy does not talk about the two elephants in the room. One, Nepra the abettor not the regulator, and our oil-guzzling, hugely inefficient IPPs. The truth is that our power plants are gulping down anywhere from 24 kg to 46 kg of furnace oil to produce 100 kWh whereby the world outside Pakistan produces 100kWh with 14 kg of oil. Shockingly, the power policy does not talk about the two elephants in the room. One, our IPPs raking in annual returns of 35 percent to 45 percent. Two, the PPP government also jacked up the tariff that sunk the industrial sector, increased the incentive to steal and doubled the circular debt.
The truly sad truth is that the government of Pakistan (GoP) has signed contracts with the IPPs on behalf of the poor residents of Pakistan. And those contracts have produced only two losers – Pakistan and its even poorer residents. Call it incompetence, another case of public money private greed or a little of both.
Why don’t we accept that the GoP and the IPPs are united in an unholy matrimony? Wedded till 2025 (read: sovereign guarantees). And, regardless of what we put in – oil, gas or coal – our IPPs in their current state of affairs are bound to produce expensive electricity.
We need a Nepra on steroids. We need Nepra to hold IPPs by their necks to improve their efficiency and produce cheaper power.
PS: Who has really formulated this policy? The GoP or the IPP lobby? Elite capture of policy is “where resources transferred designated for the benefit of the poor population are usurped by a few individuals of superior status”.
The writer is a columnist based in Islamabad. Email: farrukh15@hotmail.com
Twitter: @saleemfarrukh
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