Pepco has firmed up a five-year Public Sector Power Generation Enhancement Plan (2010-15) under which 10,000 megawatts of additional generation capacity will be added to the national grid, according to official sources quoted in a Recorder Report.
The plan, discussed during the Pak-US energy consultative talks in Washington, has identified locations, technologies and fuel to be used for achieving the envisaged generation enhancement. The talks in Washington were a continuation of the third ministerial meeting held there earlier. Pakistan side's energy review was essentially focused on the role power companies can play to ensure capacity building.
The US team, during the course of talks, is said to have been brought round to an understanding that increased power outages arising from reduced mechanical reliability of the gencos' existing machines needs to be urgently repaired to rehabilitate the existing power plants through "re-powering," which the US believes should be 1237 megawatts, at a price tag of $215 million.
The Pakistani side's position at the talks was that four major power generation companies - JPGCL, CPGCL, NPGCL and LPGCL - operating in the public sector needed prompt capacity upkeep. Pepco has, meanwhile, started month-long loadshedding because of annual canal closure for repair and desilting. Thermal generation too has been affected because of shortage of furnace oil delivery by PSO. The aggregate generation reduction is said to come to about 4,000 megawatts, which has hit different categories of consumers.
The fact that Pepco has structured a five-year power generation plan, and has also discussed it in Washington implicitly means that the entity will continue to function for at least another five years, which will be the negation of the cut-off date of October 31, 2010, announced earlier by the government for its closure, as a part of the power sector reforms.
To the power crisis has now been added the gas crisis, which has resulted in a dangerous economic slowdown. The two-day compulsory closure of textile units and the shutdown of CNG outlets because of gas rationing will leave a highly negative impact on the industrial sector. The reported trend of relocation by some investors to neighbouring countries with cheaper energy and labour rates, does not augur well for us, with our GDP growth rate already refixed way down at around two percent, in sharp contrast to the growth rates of many of our neighbouring countries.
It will be recalled that the visiting World Bank Vice President for South Asia, Isabel Guerrero, some months ago had characterised Pakistan's energy sector as "cash bleeding", and had urged the Gilani government to carry out critical reforms to bolster Pakistan's economic "sustainability." Major snags in our energy sector include an increasing dependence on furnace oil and gas, with both the inputs being very expensive. Secondly, inefficient functioning of public sector power units, which generate 38 percent less electricity than their counterparts in the private sector, due to lack of proper maintenance. Thirdly, despite paying an oil import bill of $10 billion, Pakistan is still facing an oil shortage of 350,000 barrels per day (bpd) and gas shortage of two billion cubic feet, which it has to import, at a hefty cost.
Flawed planning, failure of successive governments to ensure timely implementation of water and power projects, increasing power consumption due to changing lifestyles and electrification of villages have resulted in the rapid build-up of the energy shortfall, that has caused an economic slump. Viewed in hindsight, Pakistan's limited oil and gas reserves ought to have been prudently exploited, particularly when other energy resources such as coal, wind and solar were available in abundance.
Analysts rightly believe that the Super Flood would not have wreaked such massive destruction had dams and water reservoirs been constructed in time to take the impact of the rushing waters. Unlike us, India has constructed a string of strategically located dams and water reservoirs.
The bifurcation of Wapda into Pepco and Wapda to take care of power and water sectors, seems to have served two purposes: to get rid of the consequences of years of inaction as well as to serve as an ironclad justification for a lop-sided switchover to thermal generation, apparently to pave the way first for the induction of IPPs and then of RPPs, with the per unit cost of RPPs standing at Rs 18. All this has badly eroded the competitiveness of our exports, and hiked the cost of doing business in Pakistan. No wonder Ms Guerrero had called Pak energy "a cash bleeding" sector.
The imbalance of our energy mix, with the primary focus being on thermal generation at a time when cheaper options such as hydel, coal, wind and solar energy are available, needs to be corrected. Secondly, the government needs to implement its earlier decision with regard to Pepco, with the supervisory role transferred to Wapda's energy wing, or go for some less expensive option.
We must cut down all inessential non-development expenditure as a first step towards generating our share towards meeting the cost of mega-reconstruction and the resettlement project that lies ahead. Donors have also repeatedly advised us to do this. It is about time we heeded their advice.