09 April 2012

Electricity crisis in Pakistan: Problems and Solution

Date: 9th April 2012

 Long hours of load shedding started in entire Pakistan from last month. The duration of Load shedding was longest in Punjab. Even now the problem persists and everyday there are violent protests against Load shedding in different cities of Punjab. Complying with its past practices this government has failed to provide any slightest relief to the people in this situation. This grave problem doesn't seem to end anytime sooner. 

Electricity load shedding started to take place during Musharraf’s regime. Before that there were only occasional electricity outbreaks. Since then every year, especially in summer, people face long hours of electricity outbreak. Incumbent PPP government in its initial years announced to end this crisis in 2010 but it didn’t happen like many of its announcements. According to the independent researches and findings this problem can’t be completely solved till 2018[1]. However people can consume uninterrupted supply of electricity in periods of low demand such as winter. Now-a-days demand is not as high as it would be in peak of summer. Therefore, current load shedding of more than 12 hours is beyond comprehension.

At this time of the year, the water flow in rivers is low, as a result, Dam’s reservoirs have almost reached dead level. This is one reason for reduction in electricity generation. Despite this, the current demand can still be met through thermal power generation. Now, here the problem lies. Most of the Independent Power Producers (IPPs) are closed down because government has not paid the money that it owed them. Due to the closure of IPPs, shortfall of electricity has arisen which is resulting in countless hours of load shedding. It’s entirely the fault of ruling PPP government that they have not paid the bills of IPPs.

The problem of load shedding is made severe by the complex structure of companies involved from producing electricity to delivering it to the consumers. In order to explain the problem, one has to briefly look at the entire structure of Electric Power industry in Pakistan. Water And Power development Authority (WAPDA) was created in 1958. Initially it was responsible for everything involving electricity. In October 2007 Shaukat Aziz’s government divided the functions of WAPDA in two parts and formed Pakistan Electric Power Company (PEPCO). WAPDA’s new role only included hydel power generation and developing and maintaining water dams. Whereas PEPCO was entrusted with the task of thermal power generation, purchasing power from IPPs, transmission, distribution and billing of electricity from consumers[2].

Now WAPDA only controls dams, namely; Tarbela, Mangla, Warsak, Ghazai Broth etc. PEPCO has four different components working under its umbrella; Thermal power generation companies (GENCOs), Electricity Distribution Companies (DISCOs), National Transmission and Dispatch Company (NTDC) and Central Power Purchasing Agency (CPPA). There are four GENCOs; Jamshoro, central, Northern and Lakhra[3]. GENCOs produce electricity using natural gas and furnace oil. Country is divided into 9 regions and each region has its DISCO. The regions are Quetta, Hyderabad, Sukkur, Multan, Lahore, Faisalabad, Gujranwala, Islamabad and Peshawer. DISCO for Quetta region is called QESCO and for Lahore Region is called LESCO and so on. Karachi Electricity Supply Company (KESC) was privatized in early part of first decade of new millennium. KESC is the producer and distributor of electricity for Karachi region. PEPCO also sells electricity to KESC.

NTDC has networks of electricity transmission lines and grid stations. It receives electricity from hydel and thermal sources and delivers it to DISCOs which then deliver it to domestic and industrial consumers. CPPA collects the money of electricity bought from DISCOs and distributes it to IPPs, WAPDA, GENCOs and NTDC as per their share. IPPs sell their electricity production to PEPCO through CPPA. This network is very complex and has a lot of loopholes which can be exploited to generate corruption opportunities. Opportunists are exploiting these opportunities for their maximum possible benefit. Due to the lack of centralized authority, there is massive corruption from top to bottom in all parts of WAPDA and PEPCO. WAPDA is 5th most corrupt department in Pakistan according to Transparency International report of December 2011[4].

Ruling government vowed to dissolve PEPCO in October 2010, this decision was delayed till April 2011. After that government announced the dissolution of PEPCO and making CPPA responsible for all matters. This announcement provoked massive protests by Labour union of WAPDA and PEPCO employees. These compelled government to reverse its decision. If PEPCO was dissolved and reforms were introduced then Labour could not continue their corruption, so for their vested interests Labour unions blocked the Dissolution of PEPCO which was a step towards making power sector transparent. Government was also not fully determined to introduce the reforms because if it really wanted it could enforce the reforms with authority which it didn’t. That’s why PEPCO still exists and corruption and loot of resources is in full swing. As long as reforms are not forcefully introduced in all sectors of Water and Power, there is hardly any hope of better prospects of electricity situation in near future. 

Since last few days, Shortfall of electricity has risen to 4000 Megawatt (MW)[5]. Demand is roughly around 15000 MW. Supply varies between 7000 MW to 11000 MW depending on the number of thermal generation units operating. Punjab is facing major part of this crisis, due to its huge population and demand, which is much higher than other provinces. Although, Punjab government owes PEPCO less amount of money as compared to other provinces and on this basis Punjab government demands a reduction in Load shedding in its province. That’s made Punjab the focal point of electricity related protests. 

Federal government is unable to pay the dues of PEPCO due to bad governance. These dues mainly comprise of Circular Debt. Oil companies provide Oil to IPPs and GENCOs, GENCOs and IPPs provide electricity to DISCOs. DISCOs provide electricity to consumers and government departments. Here the problem of circular debt initiates. Government departments don’t pay their bills to DISCOs on time due to mismanagement and bad governance of government. Thus, DISCOs are unable to pay full dues to GENCOs and IPPs and as a result the latter two are unable to pay the bills of oil companies. Consequently, after certain deadline oil companies cut-off the oil supply, this results in thermal power stations shutting down. Therefore shortfall in electricity occurs due to circular debt.

The main problems faced by electricity industry are complex structure of component companies, circular debt and bad governance of federal government, not to mention corruption, which is trademark of PPP government. Now what can be the solution? The most common answer heard in response to this question is “KALABAGH DAM”, which is nonsense. This dam is a lost cause as 3 out of 4 provinces are against it. So it will never be built. Therefore it’s even useless to even mention it. “DIAMER BASHA DAM” is in initial phase of construction. It will take a minimum of 8 years to start generating electricity. So Dams can’t solve the problem of load shedding in immediate future. No one can deny the importance of Dams in long term, as a source of providing electricity, at economic rates and storing water for irrigational purposes.

Next option is nuclear energy which can be used to generate electricity in immediate future. America the so-called super power has categorically denied Pakistan’s request to provide nuclear technology for civilian purposes. After the denial of USA and realizing the fact that our Nuclear weapon was not home made but imported, there is no way Pakistan can use nuclear technology to generate electricity. The options of windmills, solar energy and tidal energy can also be considered, but it won’t be feasible for mass production of electricity, due to high level of initial investment required. Current economic situation of Pakistan doesn’t permit spending enormous funds in such projects, thanks to PPP government’s economic mismanagement and relying heavily on IMF and World Bank.

The only remaining workable solution is electricity produced through thermal energy using IPPs. Government first needs to pay the debts of IPPs so that they start working at full capacity. This will solve the problem of load shedding for now but not in peak summer. In order to counter the problem at summers, government has to encourage investment by private sector so that new IPPs can be established. IPPs take relatively less time to build and load shedding will reduce substantially in couple of years if not end totally. Foreign investment can also be attracted if government provides security to foreigner’s investment and their assets and regularly pay the bills of existing IPPs. This will increase use of oil and as a result import bill will rise but that’s the opportunity cost. That’s the only short term solution to end the problem of load shedding and meanwhile dams are built and eventually reliance on IPPs will decrease and so will the import bill. 

The collective failure of successive governments has led to the problem of load shedding. Anti-Load shedding protests are mostly taking place in Punjab because of excessive load shedding there. Situation in Balochistan is even worse excluding its capital Quetta. Protesting is democratic right of every citizen, but destroying property of other fellow citizens during protests is insane and criminal. This problem of load shedding is extremely complicated and requires patience of people to solve. People have to vote right people in forthcoming elections if they want to end load shedding. Its 21st century and we are still stuck with the menace of load shedding; this only reflects how much Pakistan has developed after 65 years of its inception.



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