The first part of the trilogy on power sector woes outlined perceptions of various stakeholders, while the second listed actual issues and obstacles to its sustainability. These articles concluded that the sector was not sustainable and would have to be re-engineered.
In other words, complete change has to be undertaken, while holding privatisation on hold for some time. Putting privatisation on hold would end uncertainty and also create the space for change. However, the concept of giving some of the PSCEs on management contracts has been considered to be feasible. Additionally, the whole canvas would have to be taken-up for correction instead of any piecemeal operations as is the case at present.
The instant article laying out the practical way forward would first of all consider the subject of financial sustainability, which in other words would mean reduced expenditures and increased revenues. Explaining the issue, it is seen that presently the cost of service for one unit of electricity has touched the high level of Rs 10, while the sale rate (even when all assumptions for tariff setting come true) is less by nearly 20%.
This translates into a gap of nearly Rs 220 billion in case Pepco/KESC, production touches 110 billion units for 2010-11. Talking about reduced expenditures, we see that this can be achieved through efficiency enhancement/improvement in the Gencos and by partly offsetting the fuel mix through conversion of oil-fired stations to coal/LNG (any extra-availability of gas seems to be quite distant).
Improvement in collection and reduction in line losses in discos, along with beefing-up of the NTDC through capacity enhancement and induction of new technologies would increase revenues. Furthermore, change in the present set-up/dynamics of tariff formulation/determination/notification, immediate setting-up of the CPPA (Central Power Purchase Agency) as an independent entity and fulfilment of the various prerequisites to such a set-up, will add onto the above.
As capacity additions are a necessity, fast tracking of the presently held-up public sector generation projects (425 MW Nandipur CCP, 525 MW Chichoki Malian CCP and 747 MW Guddu CCP) and some other quick additions in 18 months or so (amongst others a used coal fired plant of 300 to 450 MW at Lakra comes to mind), upgrading PPIB (the present legislative sanction will not make any change for the better), priority bringing in Wapda to support thermal capacity additions through coal-specially, after the demise of Pepco, would be needed to complete the job.
And additional capacities, other than through the public sector, would be arranged by PPIB and the AEDB by speed-tracking of the various processes at these entities and at Nepra. Wapda can chip in through the formulation of the public-private partnerships (PPP), with a potential of 10,000 MW in the coming five years.
Immediate change in the Electricity Act 1910 / Electricity Rules 1937/Telegraph Act 1885, declaration of electricity bills default as a non-bailable offence and complete independence of the sector from outside influence would then bring in the needed level of discipline in the operations of the discos/KESC - specially, when the present receivable are more than Rs 350.00 billion or a staggering US $4 billion or so, while the line loss figure shows an increasing trend.
As this amount includes huge amounts due against KESC and other governmental entities, the instrument of at-source deduction would have to be given greater clout, while payment / reconciliation of the outstanding bills shall become the obligation of the defaulting customers.
Additionally, the latest disco BoDs are not considered to comprise of experienced professionals and nor have the needed depth (some would also accuse the selectors of nepotism in finalisation of the same) and as such, new professional boards will have to be formulated on the principle of filling-up/arranging of the competencies that are so far alluding the various PSCEs. The new BoDs have to be made totally independent, executive in nature and also responsible for their deeds. Full ownership of the operations would thus rest with the BoDs.
Delving into another facet of the power sector, we see that the policymaking level too needs to be improved and consequently there is a need for filling-up of all positions in the Ministry of Water and Power with technical resources (having hands-on experience), requiring the Ministry of Water and Power alone to be the lead manager for power sector reforms (of course with due help and liaison with the ministry of finance and unburdening of the planning commission from this onerous task - more so, when sectoral experts are not available in the commission).
As the regulatory regime effects the operations of the power sector very deeply, we would have to take-up immediate capacity building of Nepra/Ogra and do away with the 2007 change/amendment to the Nepra Act relating to the qualifications of its chairman (presently sub judice in the Supreme Court).
With this should end the load suppression model of power tariffs, the concept of cross-tariff subsidisation along with the lifeline consumers and the special tariff for this class of customers. In fact, the sector should be isolated from any requirement to bear the brunt of socio-political obligations of the GoP. On the other hand, such obligations can be discharged through targeted subsidies. The imperative data gleaned from the poverty survey can be gainfully used for this purpose.
Another important fact that needs to be borne in mind is that gaps in power supply are to remain for quite some time. One way to mitigate the shortages would be to resort to load management or load shedding or alternately to take-up measures to stop wastage in the system. The latter can be stoppage of actual abuse, waste, inefficient use and an understanding into the dynamics of smart usage.
This all thus could be implemented through the national energy conservation strategy (including the Pepco agenda) and regular meetings of the national energy conservation council/setting-up and strengthening of its secretariat at Enercon. As conservation necessarily needs the general public to be educated, a mass awareness campaign is a must, which normally will result in huge expenditures.
This requirement can somewhat be mitigated by making changes in the present Pemra ordinance necessarily requiring the electronic media to carry public service messaging for conservation. In case the existing ordinance/act has such clauses, then necessary clout would have to be given to the regulator to implement the relevant clauses.
In case, all the above is not done as a national policy on the immediate basis, the power sector cannot ever be taken out of the crises it is facing since 2005 and nor would it make way for the implementation of the under updation (from its 1994 version) national power plan (NPP). Incidentally, it was mothballed after the induction of the IPPs.
The implementation of the national plan actually holds the key to a viable power sector, as it is designed on the least cost generation formula. It can arrange for the needed capacities of 43,000 MW in 2015, 65,000 MW in 2020 and 1,25,000 MW in 2030. It is also of great import to understand that the ownership of the plan has to necessarily remain with the Ministry of Water and Power and implementation through Wapda, which remains the only legislated entity to undertake development of all water and power-related infrastructure projects.
Bodies like the PPIB and the AEDB also tasked to make capacity additions would automatically fall into the greater mosaic. The possible formation of the Energy Ministry or the NEA (National Energy Authority) in the coming future will not affect the above roster of activities, as the new entities can take-up whatever is needed to be done.
Coming back to the most important conversion of oil-fired thermal units to coal, we see that the program will be spread through a period of 12-18 months, but would not require layoffs or shutdown as conversion equipment would be installed alongside the existing equipments (mainly boilers) leading to actual layoff of just 90 to 120 days alone.
This would reduce the cost of generation by at least 40%, even while paying for the conversion. Alongside, would be implementation of the rehab programme leading to enhanced capacities of the existing public sector plants by up to 1000 MW. However, a cogent fuel supply system will have to be arranged so that both the conversions and the rehab modules lead to the envisaged gains.
The present working of discos and the NTDC on the other hand, can be improved with due monitoring etc, but merit in posting would have to be ensured. More so, when disco and the NTDC operations are extremely intricate and demand high levels of honesty and intellect. The institutional and policy level decisions, of course, have to be taken by the GoP.
Summing up, we see that the above 20 points programme provides the road map that will reduce pressure on the GoP to increase power tariff and also make the sectoral operations sustainable. Implementation of these would change the economic landscape of the country and provide the people the required level of service in about three years. Additionally, this would create and provide the space that is needed to implement a long-term programme to correct the presently lopsided generation, fuel and customer mix.
(Concluded)
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