A Letter from Prometheus
The energy sector of Pakistan has been in a circular debt trap for a long, and the IMF Extended Fund Facility (EFF) arrangement also indicates that the country must cap its circular debt through the ‘Circular Debt Management Plan’ (CDMP). Total circular debt is around Rs 1400 billion and the immediate decrease of circular debt demanded by the IMF is around Rs 952 billion.
Dependent on thermal energy and victim of the fossil fuel mafia, Pakistan is facing today what we had planned in the early 1990s. There is a long story about how multinationals with the help of bureaucracy made fools of politicians for restructuring WAPDA in 1992. I was covering WAPDA as a beat Reporter in the 1990s and still remember that line losses in 1992-95 were around 12 percent while the government with a single stroke of bureaucratic pen allowed Independent Power Producers (IPPs) to enjoy 18 percent line losses. We must remember that the burden of line losses falls on consumers who pay for line losses, not the IPPs or the government.
WAPDA’s Strategic Plan 1992, re-structured WAPDA and only Hydel generation remained with WAPDA, while its other functions were unbundled. Several public sector entities were installed including Transmission and Dispatch Companies (NTDCL), Distribution Companies (DISCOs), and Generation Companies (GENCOs). The Private Power and Infrastructure Board (PPIB) was established in 1994 to provide a one-window facility to Independent Power Producers (IPPs). The above-mentioned arrangements provided huge opportunities for the District Management Group (DMG) group, now called the Pakistan Administrative Service (PAS) group, for lucrative salaries and controlling the entire power structure of Pakistan and minimizing the role of practitioners and experts, like public sector engineers. Private Sector Power Generation (PSPG) was inducted in Pakistan in 1994. These bureaucrats were now in a position to deal with a forthcoming lot of independent private power producers, and a regulatory body namely NEPRA was created in 1997 where the DMG/PAS group ensured a monopoly.
Since these arrangements, nothing is in the hands of politicians, and the federal ministry and minister were made puppets of what the above-mentioned authorities decide. Since IPP was a lucrative commercial activity for everybody linked with this business, the hydel sector was totally ignored and for the next two decades nothing was done to plan for hydel energy resources. By 2022, the share of thermal energy was over 69 percent, hydro was 27 percent and renewable energy share stood at 3.15 percent.
Since thermal power generation occurs in far-flung areas therefore the length of transmission lines extended after the 1990s increased, so the line losses increased. Right now 500 kV/220 kV Transmission Lines length is 19,500 km.
In 2015, the PML(N) government introduced the “Power Generation Policy 2015” to facilitate private investment in indigenous resources for controlling the import budget of foreign oil for thermal plants. It must be remembered that according to IPP contracts, it is the responsibility of the government of Pakistan to provide imported oil to thermal plants— that is the reason for circular debt.
Many independent studies indicate that one of the major causes of the increase in energy unit price to consumers is line losses. In the financial year 2021-22, the amount of power lost during transmission by distribution companies was recorded at 22,298 (GWh. In the same fiscal, the financial effect of transmission and distribution losses as a result of the inability to reach National Electric Power Regulatory Authority (NEPRA) goals was also calculated at Rs 520.3 billion.
Major investment is needed in the transmission system, including new automation and control systems, establishing more wind and solar energy facilities, and initiating small-size hydel projects. Small-size to medium-size hydel projects take two to five years for production while solar and wind energy can be produced in the shortest possible time.
The IMF is directing Pakistan to finance an unbudgeted Rs 675 billion power subsidies with a mix of electricity tariff increases and other revenue-enhancing measures. The government would soon enhance the price per unit which is already around Rs 24 per unit to domestic consumers. According to insiders an increase of Rs 6 per unit for domestic consumers would be announced by June 2023 and then there would be an extra jump of Rs11 per unit, and therefore the cost of one unit to domestic consumers would stand at around Rs 35 per unit (less than 500 units’ usage) in July 2023.
A World Bank-funded “Variable Renewable Energy Integration and Planning Study” indicates that solar and wind power should be urgently expanded to at least 30 percent of Pakistan’s total electricity generation capacity by 2030.
Everybody knows that expanding renewable energy will make electricity cheaper and will achieve greater energy security. Installation of solar and wind power facilities is possible with the proximity of the areas where energy supply is needed, therefore such facilities would have shorter lengths of energy transmission and line losses would reduce drastically. A World Bank study indicates that Pakistan can save import of oil for energy production (thermal) of up to $5 billion over the next 20 years.
According to another report, utilizing just 0.071 percent of the country’s area for solar photovoltaic (solar PV) power generation would meet Pakistan’s current electricity demand.
Pakistan has several well-known wind corridors and with average wind speeds of 7.87 m/s in 10 percent of its windiest areas; mostly in Balochistan while solar energy can be produced anywhere in Pakistan. Nevertheless, the installed capacity of solar and wind energy in Pakistan, at just over 1500 MW, is just 4 percent of total capacity, equal to around 3.5 percent of total generation. Hydel energy is increasing in Pakistan thanks to the CPEC project and Chinese intervention in Pakistan’s energy market. Moreover, the utilization of local coal for thermal energy production is also increasing. Anybody who has common sense understands that Pakistan can achieve over 24,000 MW of additional capacity by 2030 if we have coordinated and sustained efforts by both the federal and provincial governments.
Major investment is needed in the transmission system, including new automation and control systems, establishing more wind and solar energy facilities, and initiating small-size hydel projects. Small-size to medium-size hydel projects take two to five years for production while solar and wind energy can be produced in the shortest possible time.
The only need to enhance cheaper energy is the will to achieve it and I am sure the imported fuel mafia would not loosen its grip over the energy sector and we will keep thinking about producing at least 50 percent of our total demand through clean and cheaper energy resources like hydel, solar and wind energy.
Remember Pakistan is the heaven of Mafias.
