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Pakistan’s Power Politics

Center for Reserach and Security Studies has recently published a weekly pager last week on the precarious power politics in Pakistan the write up can be downloaded from CRSS as well

In 1985, Xenel Corporation of Saudi Arabia conceived the setting up of a mega-power plant in Pakistan’s private sector. The sponsors of Hub Power Company had to negotiate for nine long years with 11 successive Pakistani governments and at least 40 different bank-lenders before they could sit and sign an Implementation Agreement (IA) with the government of Pakistan then led by Prime Minister Nawaz Sharif (the IA was signed on August 3, 1992). Hub Power’s four steam turbines of 323 MW each, for a total of 1,292 MW, were commissioned on March 31, 1997.

In 1993, the Pakistan Peoples Party won elections. In 1994, Prime Minister Benazir Bhutto unveiled Power Policy 1994. The Private Power and Infrastructure Board (PPIB) was inundated with 116 applications amounting to an accumulated generation capacity of 26,000 MW. The PPIB selected 75 applications — amounting to an investment of some $20 billion — to whom it issued its Letter of Intention (LoI). After further scrutiny and a deposit requirement of Rs100,000 per MW, a total of 33 applicants were issued Letters of Support (LoS). Eventually, 14 of the 33 applicants were able to reach financial close.

In 1997, Mian Nawaz Sharif was elected prime minister once again and he unveiled Power Policy 1998. Power Policy 1998 was a complete failure. In 2002, General Musharraf unveiled his Policy for Power Generation Projects 2002. The Policy for Power Generation Projects 2002 over its seven-year life span has so far added a paltry 165 MW. According to the PPIB, we now have 17 private power producers with a capacity of around 4,500 MW. Of the 4,500 MW, private power producers with a capacity of some 800 MW have been shut down. All other private power producers are operating way below their full generating potential.

Two questions: why have some private power producers completely shut down? Why are private power producers operating way below their full generating potential? Two answers: political score-settling plus the circular debt.

We at the Centre for Research and Security Studies (CRSS) have been trying for months to ascertain the crux of our power politics. Almost all roads lead back to the government. The federal government is the largest power defaulter, then come the four provincial governments, FATA, the KESC and the KW&SB. This is how the circular debt explodes into even bigger circles: the federal government does not pay its electricity bills to Water and Power Development Authority (WAPDA).

WAPDA is then unable to pay for electricity it buys from IPPs. IPPs are then unable to pay for their oil supplies. Refineries, short on cash, are unable to pay their foreign suppliers. Grow, grow, grow and we have a Rs200 billion time bomb.

Welcome to the rental power bonanza; the government’s ingenious – canny, crafty and cunning – all-in-one solution for the crux of our power politics. What we need to do is to re-start the power producers that are shut down. That’s 800 MW at US 11 cents per MW. What we need to do is to resolve our circular debt puzzle. What we need to do is to get our sugar mills connected to the national grid which could generate an additional 2,200 MW at less than US 11 cents per MW.


12 Comments

  • Anas |

    Ex-Brig Imtiaz and Naseer Babar admit that the *Jinnah Poor* maps (that were once *recovered* from 90) were false accusations

    http://ejang.jang.com.pk/8-25-2009/pic.asp?picnam

    Wow!!! what a Chuttoo Fauj!!!!

    Honestly, this is what our Pakistan Army is capable of.

    Now Zaid Hamid Kezzab and Ahmed Qureshi would come and justify these actions of Pakistani Fauj too, just like they claim the saint-hood of Pakistani Fauj during fall of Dhakka

    This is what happens when you mix facts with false hoods

    Now, MQM would come and say all the accusations against it are baseless

    Kudos to the b!tches in Uniforms

  • MQM the Saint |

    Anas – U expect to believe altaf hussain "the professional liar"

    Those who whoreship him have their reasons

  • Nadeem |

    Seems little distorted article. Let us try to understand how it works.

    1. When talking about Installed capacity of IPP's and they are running on lower capacity. Installed capacity is much higher at beginning, with time capacity reduces due to older plant. Running a 15/20 years older plant at its peak capacity is simply not possible – thats why some IPP's are running at low capacity.

    2. Why some IPP's shut down? Again, it is plant and operator. Some guys earn money and rather they paying for fuel lost in a Casino. Company goes to drain.

    Major factor is still the plant, some times maintenance costs for old plant and consumption is higher then production, so no one likes to run it in loss.

    3. Power polcy of ZA Bhutto was to generate from Hydal sources, he gave us few Dams which produce way cheap then any other source. BB's power policy was market oriented. There was not enough time and resources to go for state own production. So no choice. Sharif had as much understanding of power as much flying an aircraft.

    4. RPP's are inevitable as demand is growing at 7% a year. I think RPP's will stay there for next few years even new projects start production. Still gap n demand and supply will continue widening. Until Bhasha and some other big projects come online.

    5. Circular debt is a reality. Pakistan is only country in world where 60% electricity is stolen. FATA, Karachi,Industralists in Punjab and Feudal…all take a bite.

    Such articles pop up with a specific timing, if Ansar Abbassi does not understand the simple things, it is understandable, but this research group doesn't understand these facts is wired.

  • Maqbool Ahmad |

    The biggest tragedy and a sad dilemma of our country is hypocrisy and manipulation, unfortunately 90% people come up with two faces in our every day life, TV shows, news conferences. This is one of the sign of Qiyamat. If we can address this issue first, all our problems would be solved. I mean above comment is definitely written by a govt crony, or a jiala. Was it not better to boldly come forward with actual nomenclature? After all your comments carry weight.

  • Nadeem |

    Maqbool Sahib, neither I am Jiala not government crony. I wish you would have challenged (there are figures and reasons) the facts rather then writing a useless paragraph and pushing burden to Allah and Quiamat!

    This is our dilemma! No body wants to learn anything or do some research, just watch a TV shows and become George Saros.

    And yes, energy and economy is my specialty.

    I built this factory, its installed capacity was 48 Ton a day. The plant performed at otimum level. We got production of over 60 tons a day. Above the capacity. In five years time plant becomes old and hardly gives us more then 40 tonnes production. With time maintenance costs increases, breakdowns more frequents and in end of the day it production can not meet costs. Now this machine gets offline and then other. It is making losses.

    After 10 years or so operation I talked board, either we put up new plant or shut down. They told to shut it and send for scrap. No new plant as every one wants to put their moeny for more profitable businesses. Greener pasture.

    This is how corporate works. We can not make a dead horse run again. If so, it will cost equal to Air Bus A 380. I hope you read carefully this time and tell me I am wrong!

  • Hassan Abbas |

    Nadeem is clearly not from govt. nor jiala. Being an electronics and Instrument engineer, I can say the reasoning he gave is true.

  • frankesian |

    "" If u are asked to buy a buliding for 5 crores or taking it on rent for five years at rs 1 crore/year .then what will be ur choice.?THis is what wapda and rental power projects are" Cost per unit will be not less that 15 rs per unit." Jago Gahak [email protected]

  • Pakistani Resources |

    Rental plants – a short-term solution to power shortage

    Pakistan Electric Power Company Managing Director Tahir Basharat Cheema stunned the nation the other day when he said power shortage would not be completely removed by December this year.

    This strengthened the talk that many rental power plants, which are part of a fast-track plan to eliminate the power deficit of 3,500 megawatts, are still on papers and no work has started at all. But in advertisements published in leading newspapers recently, PEPCO claims it will be able to eliminate the power deficit. Many rental power plants will not be able to come on stream by December this year as the government has failed to make down payment to various companies. This may leave a power deficit of 1,200 to 1,500 megawatts in December.But i think our government is deceiving to their people