The riots over the worst-ever energy crisis and the destruction of property during these riots in several cities of the country have once again highlighted the consequences of neglect and mismanagement of the energy sector witnessed in Pakistan for several years.
Electricity rates in our country are already among the highest charged for this commodity anywhere in the world. The government is poorly advised to keep increasing these rates to pay the circular debt, as increasing electricity rates neither solves the problem of circular debt nor put an end to power outages.
Blaming the circular debt for power outages is wrong. The circular debt is merely a symptom – one of the several – not the cause of a deeply embedded malaise which has trapped the country in an unaffordable energy paradigm.
According to Transparency International’s estimates as much as Rs100 billion of extra payments are received every year by the KESC and the independent power producers on account of various loopholes in the costing system. The TI has been urging for their cost audits to ensure that the gravy train of extra costs is eliminated from inflated bills.
The government can save another 100 billion by cutting down on the multilayered fat, freeloading and wastage of electricity in several establishments of government, local councils, Wapda and other public-sector entities. If it helps in jolting conscience where it matters, one might recall that Queen Elizabeth herself often turns off extra lights in the Buckingham Palace before retiring for the night.
That would leave only Rs100 billion out of the current annual bill of Rs300 billion which the consumers would be asked to pay for the blunders of the many energy czars who have persisted with an energy policy which itself is the root cause of power outages, people have been experiencing across the country.
Without cost audits and trimming out freeloading fat and wastages, deducting inflated circular debt bills at source from provincial government allocations, would be an invitation to even bigger wastages and inflated bills.
As easy as the solution is, it has been difficult to find spine in the energy czars to stand up to the well-entrenched vested interests and implement policies that deliver cheap and affordable energy to the people like in many other countries. The only way for this country to dig itself out of the deep hole of its ruinous energy policies would be to respect and follow the wisdom of the rest of the world on energy.
While the rest of the world uses coal for over 40 percent – with several countries using coal for over 90 percent of power generation – Pakistan uses it for less than one percent. And, while the rest of the world uses oil for only five percent of its power generation, Pakistan uses it for about 40 percent.
And if that was not bad enough, the ‘New’ Energy Security Action Plan (2005-30) of the Shaukat Aziz government wanted to further increase our dependence on imported oil to 52 percent! The rental power projects (RPPs), launched in 2006, are also a gift of the same energy policy to the nation.
Reversing the ruinous equation between oil and coal is the obvious solution for Pakistan. But easier said than done. For 20 years this writer has observed from close quarters how one excuse after another has been deployed to deepen the country’s dependence on imported fuels for power generation. And every trick in the bag is employed to delay, defer or dump altogether the use of abundant indigenous sources of energy like coal – which can generate power at half the cost and come on stream within three years of launching!
The only serious effort for delivering major coal-fired power project that successfully crossed all stages within a short span of 18 months – from worldwide marketing, to negotiating, financing and actually delivering a complete project with necessary power purchase agreements – was concluded in 1996.
That project, with 100 percent private-sector funding, was producing 5200 MWs (4 x 1300) of power at 4.6 cents/kwh – the lowest cost of any thermal power project in Pakistan. The foundation stone of that power house at Keti Bandar was laid in January 1996 by prime minister Benazir Bhutto. But a year later, the project fell victim to the destructive politics of the country and was abruptly cancelled by Nawaz Sharif’s government.
The second blow to coal-based power generation from Thar coal was inflicted by none other than the man who was honoured by the simple folks of Thar, who elected him, unopposed, as their MNA – Shaukat Aziz – who on the strength of being MNA from Tharparkar became prime minister of Pakistan.
He returned their trust by killing the Thar coal project while presiding the ECC meeting in 2006 when the summary of the project was presented before him for his approval. That summary, based on findings of three-year field work – at their own cost – by Shenhua (sent specially by the president of China to launch coal-fired power generation programme here) – established the technical and financial viability of power generation from Thar coal at 5.6 cents per kwh.
While Aziz rejected Shenhua’s proposal, his government, at the same time, was approving oil-fired power projects at 11 cents per kwh – twice the cost of coal-fired power. It was also the same year when the rental power project programme was started by the Aziz government.
For the last three years, the talk of underground coal gasification (UCG) from Thar coal, funded by the government, has been filling the media space and time. Now an audit report by the Planning Commission says that the project has not proved viable and has been closed.
It transpired that what was originally started as a 10MW pilot project to test technical and commercial parameters of UCG concept in Pakistan became open-ended and went on expanding itself without first establishing the technical and commercial viability the pilot project.
More than the Planning Commission, the project was damaged by its overambitious protagonists who indulged in the kind of hyperbole associated more with politicians than professionals. The good doctor disappointed many well-wishers who wanted him to first establish the technical and commercial viability of UCG pilot project, so that it can then be marketed to private investors at home and abroad.
Thus, many years and billions down the road, not a single ton of coal has been mined from 175 billion tons of Thar coal, leave alone generating power from it. The real solution to Pakistan’s power-sector problems – mining coal and coal-based power, a cheap, labour-intensive, time-tested technology (now with reduced carbon emissions) used by scores of countries – remains as elusive as before.
It lies buried under the weight of inertia, adventurism, special agendas and manufactured confusion, while misery piles upon households and industries with the latter migrating to other destinations.
The writer, as head of board of investment, negotiated and concluded agreements for 4x1300 MWs coal-fired power projects under the Benazir Bhutto government in 1996. Email: smshah@alum. mit.edu