Electricity crisis: Hafeez, Naek flay water, power ministry for its inefficiency

MUSHTAQ GHUMMAN

ISLAMABAD: Finance Minister Dr Abdul Hafeez Shaikh and Minister for Law, Farooq H Naek have reportedly criticized the Ministry of Water and Power for its failure to manage power crisis, recoveries from consumers on the basis of actual receivables rather than jugglery of figures and not taking defaulters to task.

This is the crux of federal Cabinet's meeting held on June 13, 2012 under the chairmanship of Prime Minister Syed Yousuf Raza Gilani.

Official documents exclusively available to Business Recorder revealed that the Finance Minister while talking about the financial crunch stressed that the issue was not only monetary.  According to him, the problem of circular debt and the big issue of shortage of electricity primarily governance issues needed to be comprehensively addressed at the earliest.

The Finance Minister talked about increasing generation capacity (both actual and realizable); rising cost of electricity; the non-production of cheap electricity; reduction in cost of electricity after enhancing generation capacity.  The Finance Minister, on his part, again committed that financial requirements will be honoured by the Finance Division, but proper homework had to be done by the Ministry of Water and Power to manage the crisis effectively.  He also desired a tracking system to monitor the load-shedding and its proper management.

Talking about prioritization of load management, he particularly mentioned KESC which has an excellent system focusing on supplying uninterrupted electricity to areas where bills are being paid on a regular basis. He was of the view that in terms of conservation anything saved is added to the system potentially. In terms of recoveries the Finance Minister stressed that these should be made on the basis of actual rather than just figure jugglery.

Minister for Law and Justice, Farooq H Naek was of the view that against total recovery of Rs.378.74 billion - Rs.127 billion is stuck up due to court injunctions/stays.  The Law Minister was critical of the working of the legal team of the Ministry of Water and Power, whereby courts should have been conveyed that under the law interim injunctions or stays are not granted by courts in matters related to collection of public recoveries, for a period of more than six months. He also pointed out the lack of action by the Ministry of Water and Power for not taking the defaulters to task and for not prosecuting theft cases as per the law.

The following points were also raised in the Cabinet meeting; (i) stays granted by the courts against the Rental Power Projects has affected power generation significantly; (ii) provincial governments are given subsidized electricity despite the fact that no bills are paid by Fata, AJ&K etc; (iii) in rural areas 16-18 hours load-shedding has huge impact in agricultural output/productivity; (iv) progress under the current government in making big, medium or small dams should be accelerated; (vii) areas under Fesco, KESC, JPCL where recoveries are sound should be facing less load-shedding.

Earlier, the Cabinet was briefed about the current energy situation in the country due to the electricity shortages and the resultant instability. The Cabinet members were given a comprehensive briefing on the issue and measures being taken to improve the situation by the Ministry of Water and Power, details of which are as follows:

Existing generating capacity:

Total available generation capacity (including Wapda hydro, Gencos and IPPs as well as nuclear) is 15800 MW in summer (peak) while it is 9800 MW in winter (peak)

Situation analysis:

(a) Financial: Tariff Differential Payment(TDP) - The cost per unit is Rs.11.89 whereas sale price is Rs. 8.88/unit and difference is Rs.3.01/unit (Rs.20 billion per month since March 2012).

Fuel Adjustment Surcharge - Rs.69 billion not recovered since September 2011 due to court stays orders in about 750,000 cases. 4 percent Equalization Surcharge - Rs.58 billion not billed since July 2011 due to court stays.

Sectoral:

The reasons were given as: diminishing gas supply to the power sector; low priority to conservation and efficiency and poor maintenance of Gencos.

Cost involved for immediate addition:

For 2000 MW addition - fuel supply cost is Rs.1.3 billion per day. For 2000 MW addition - if 291 mmcfd gas allocated cost is Rs.574 million per day.

Current priority of gas allocation - domestic and commercial sector is the first priority.

Fertilizer sector and industrial sector to the extent of their process gas are at second priority. Four IPPs (dedicated fields) and Guddu Power Plants having firm gas supply commitment under GSAs) is at third priority. General industrial, CNG sector is at fourth priority. Wapda and KESC's power plants (other than those at third priority) and Captive Power Plants (CPPs) are at fifth priority. Cement sector is at sixth priority.

Projected Demand and Supply Position:

In June 2012 generation capacity is  about 14,151 MW while expected demand would 18,264 MW and shortfall is 4,113 MW which is a lie.

In July 2012 generation capacity would be 15,800 MW while expected demand would 18,3000 MW and shortfall would be reduced to 2,500 MW.  In August 2012 generation capacity is about 15,210 MW while expected demand is 18,322 MW and shortfall would be 3,112 MW. By November the shortfall is expected to be 4500 MW.

Receivables Status (April 2012):

Federal Government (Depart-ment/Agencies and defence) - Rs.14.02 billion.

Provincial Government (Department/agencies) - Rs.69.90 billion.  Provincial Government (agricultural tube-well subsidy) - Rs.11.95 billion, AJ&K - Rs. 11.95 billion, KESC - Rs. 60.61 billion. FATA - Rs. 21.81 billion, IPPs - Rs. 0.14 billion, payable by KPK consumers for delayed tariff, increase due to court cases- Rs. 18.60 billion and private sector - Rs.166.29 billion.

Total receivablesRs.378.74 billion- After giving detailed briefing to the Cabinet, the Ministry of Water and Power presented the following action plan for approval of the Cabinet: (i) priority gas supply to power sector;(ii) adjuster to support recovery from public sector defaulters/ provinces;(iii) full payment of subsidies including TDS, FATA, KESC and AJ&K regularly; (iv) Disco loss reduction and increase recovery, and recovery from within the existing installed capacity of Gencos by rehabilitation till November 2012.