Govt concerned about German KFW’s analysis on Pak power sector

KFW never contacted Power Ministry to get authenticity of facts, findings

Islamabad

The Ministry of Water & Power on Tuesday expressed serious concern over the German KFW bank’s analysis regarding Pakistan’s power sector, what Islamabad termed it as an attempt to refute, rather scandalise its claims of getting efficiency, great achievements and reducing power outage manifolds for last couple of years. 

KFW never contacted the Ministry of Water and Power to either ascertain the authenticity of facts nor discussed any of its findings with the ministry, which is the norm with the development lending agencies, before finalising any report. “The language used in the report and the fact that it was prepared and released to media in an indecent haste, create doubts about the intention of its writer(s),” an official clarification of the ministry said. 

It is worth mentioning that the KFW has termed the government’s claims of turning around the power sector through efficient generation and effective control as politically influenced. The ministry official figures say that the power generation from government owned units have increased by 25 percent since 2013. Besides, the losses of around Rs7.7 billion in 2013 had been overcome and turned it into profits of Rs5.7 billion in 2016. 

The ministry says that these achievements were made possible by better performance in terms of efficient use of fuel and better controls. While none of the figures reported by the ministry have been refuted in the report, the performance of the ministry has been attempted to be tainted with conjectures and twisted analysis, it said.

The KFW’s claim that the increase largely came in Muzaffargarh figures due to inclusion of Nandipur plant is also incorrect. The data proves that Muzaffargarh plant generated 4.311 GWh in 2014-15 and 4.645 GWh in 2015-16 thus registering an increase of 7.7 percent from its aging units. The generation at Muzaffargarh in 2014-15 consumed 1,285,556 metric tons of oil and would have required 1,384,210 metric tons of oil for the increased generation in 2015-16, had the fuel consumption efficiencies not improved and pilferages not checked. However, this higher generation was achieved while consuming only 1,285,130 metric tons. Thus a massive saving of 99,079 metric tons was achieved in a year, amounting to Rs3.28 billion, reducing import of around 1.5 ships of oil load (saving approx. $31 million in imports). This is how greater efficiencies and reduction in losses were achieved as claimed in the advertisement. The report fails to reach into the depth of these matters, the ministry said.

Any objective analysis of ministry’s claims in the advertisement of “turning losses into profits” through “efficient fuel consumption and better controls” would have required two basic queries to be answered: (i) whether the consumption of fuel has decreased for the same amount of generation? This being the measure of efficient fuel consumption. (ii) How the losses have been converted into profits by the generation companies? Is it through some real improvement in control systems, monitoring and accountability or through some cosmetic measures if the ministry was “politically influenced”, as claimed in the report.

A professional probe by the report writer (s) would have got them the data which would have shown that the Muzaffargarh plant which was rehabilitated in 2013 with technically improved efficiency, could not achieve its financial benefits in the coming years till 2015, where the administrative controls and monitoring improved its profitability by reducing overall losses. They would have come to know of the digitised fuel receipt and inventory system installed at Muzaffargarh which has reduced the chances of the pilferage of oil which used to be the scandal for the past many years. They would have realised how this has hurt interest of the mafia which used to earn billions from this organised theft. The claims of success on this account by the ministry hits into the heart of that mafia.

In any given power generation regime, the operator has to run maximum capacity in peak hours and to reduce it in non-peak hours. Such reduction in generation, in any efficient system must come by closing plants with high generation costs. The older Genco plants being on the lower end of the efficiency chart, are thus shut down for more hours than the efficient plants. The fact that these plants have still achieved an increase in the overall generation by 25 percent was due to the fact that the overall loadshedding was brought down form 12-15 hours in 2013 to 3-4 hours by the end of 2016. 

The use of less efficient plants will further reduce in the coming years as more efficient plants come into the system in 2017 and 2018. It will further improve basket price for the consumers. It is due to strict observation of merit order dispatch system by NPCC that power consumers are still being provided Rs2-3 per unit in fuel price adjustment every month, despite rising oil prices for past one year, having jumped from $30 per barrel in Jan 2016 to now $53. Nowhere in the advertisement, had the ministry claimed that increase in generation due to any power plants initiated by the present government. It is a common knowledge that Nandipur was initiated in 2005, turned sick and remained stalled till 2013 to be resumed and completed in 2015, by the present government. Hence such criticism in the report was unnecessary and irrelevant to the context of the ministry’s advertisement.

The report confuses generation with efficiency when it says: “achieving generation efficiency as high as 25pc is applauding indeed”. The ministry in its advertisement had not claimed achieving 25 percent efficiency (which is higher in overall generation mix of Gencos); the advertisement claimed increase in generation by 25 percent.

The ministry rejects the report as being done without due research and lacking in professional competence. We reiterate the claims in the advertisement and invite any analyst or reporter to interact with the ministry and verify the claims in the advertisement of having achieved better fuel efficiency and of turning losses into profits. “We take pride in the improved performance which has resulted in lowering the losses to the exchequer by reducing pilferages, better management and efficient use of the generating capacity by strict enforcement of merit order generation. It cannot be claimed that the multifarious problems, inefficiencies and malpractices in the power sector have disappeared overnight. All progress has to be incremental and should only be judged in comparison with the past,” ministry said.

The history of the power sector is changing as the government owned generation companies are coming out of losses, for the first time in many years. The distribution companies have successfully reduced their AT&C losses by 5.2% again for the first time in the history of power sector. The transmission system, constrained to only 15,600MWs, transmitted 17,540MWs in 2016, when 85percent of the total available capacity was dispatched.