ICMA webinar reveals comprehensive plans aimed at revolutionising energy sector

KARACHI: In a recent live webinar organized by the Institute of Cost and Management Accountants of Pakistan (ICMA), themed “Electric Power Sector and Economy of Pakistan” Shah Jahan Mirza, the Managing Director of the Private Power and Infrastructure Board (PPIB), revealed comprehensive plans aimed at revolutionizing Pakistan’s energy sector.

Representing Muhammad Ali, the Caretaker Minister for Energy, Mirza shared pivotal insights and outlined an ambitious roadmap during this impactful event. The other distinguished speakers and Panelists of the ICMA Webinar included Lt General Sajjad Ghani (Retd) (Chairman Wapda), Tauseef H Farooqi (Former Chairman NEPRA), Asif Inam (Vice President FPCCI), Mohammad Zubair Motiwala (Chief Executive TDAP) and Irfan Munawar Gill (Managing Partner, Islamabad Law Chambers). Shehzad Ahmed Malik, President; Ather Saleem, Vice President and Aamir Ijaz Khan, Executive Director from ICMA were also present.

During the webinar, Mirza disclosed the government’s intention to establish a “Competitive wholesale trading market for electricity” originally proposed in 2005-2006 and later postponed to 2014. He underscored the imminent launch of this market by mid-2024, emphasizing its potential to foster competition among stakeholders, enabling large-scale consumers to procure electricity while allowing DISCOs and Private Generators to vend power.

Furthermore, Mirza elaborated on the PPIB’s 10-year electricity generation plan, intricately designed to meet the nation’s demand and align with its economic needs. Addressing the backlog of approximately 100 Letter of Intents (LOIs) received for solar and wind power plants, categorized as Category 3 projects, Mirza disclosed the impending commencement of competitive bidding process very soon to expedite these initiatives.

Moreover, he outlined a comprehensive 10-year power generation expansion plan, concentrating on renewable sources like hydro, solar and wind projects. This strategy, subject to annual review, aims to initiate bidding processes for power procurement. Notably, bids are currently open for a substantial 600MW Solar PV power project situated in Kott Addu, Muzaffargarh area, with a submission deadline set for January 11, 2024.

Mirza reiterated the government’s commitment to balancing power demand and supply sources in Pakistan, addressing the issue of low per GDP power consumption coupled with underutilized capacity. Efforts are underway to rebalance capacity and variable payments, aiming for a 50:50 ratio or better.

In line with the government’s vision, Mirza unveiled plans to significantly increase the share of green energy projects, particularly solar and wind generation, from the existing 31% to an ambitious 62% by 2031. This transformation necessitates an estimated investment of up to $50 billion, underlining Pakistan’s dedication to embracing clean and sustainable energy solutions. Additionally, substantial investments ranging from $25 billion to $30 billion would be needed to enhance the country’s transmission and distribution systems, ensuring efficient power delivery to consumers.

In response to Zubair A Motiwala’s suggestion advocating immediate privatization of DISCOs for enhanced efficiency, the Managing Director of PPIB revealed an alternative government strategy. Rather than divesting the DISCOs outright, the government is contemplating a different approach: granting them long-term management contracts spanning 10 to 15 years.

These contracts would entail predefined performance benchmarks, set targets, required capital investments, and the potential for profit-sharing based on achieved improvements.

The MD-PPIB further elaborated that active work is already in progress on this proposal, supported by financial assistance from the International Finance Corporation (IFC).

A decision regarding this innovative strategy is expected to be presented before the Cabinet within the forthcoming weeks.

Motiwala recommended that if the government considers disinvestment, it should concurrently focus on making strategic investments to augment the infrastructure base of the DISCOs.

Lt General Sajjad Ghani (Retd), Chairman Wapda clarified Wapda’s current role, highlighting its focus on power project development and generation, having transferred distribution and transmission responsibilities a decade ago. Wapda manages 22 hydel power stations with over 10,000MW capacity and aims to reach 21,000MW in 3-5 years, propelled by projects like Diamer Basha and Dasu Dam.

Asif Inam, Vice President, Federation of Pakistan Chambers of Commerce & Industry (FPCCI) highlighted Pakistan’s pressing energy crisis. He noted the country’s electricity prices, which are over twice the rates of neighbouring nations. This discrepancy is due to IPPs securing a 70% return on electricity generation.

Depletion of alternative energy sources and high unit prices, required to cover excessive installed capacity, have led to a drop in the export to GDP ratio to 13%. Inam suggested spreading the electricity debt across all sectors, not solely on consumers, and proposed providing gas to industries to potentially boost production by 50 percent.

Mohammad Zubair Motiwala, ex-President of Karachi Chamber of Commerce and CEO of TDAP, raised concerns about Pakistan’s high electricity prices hurting the competitiveness of its exports, especially in textiles. He cited Bangladesh as an example, earning $40 billion in exports by offering cheap electricity, gas, and labour to attract investments.

Motiwala cautioned against increasing power projects without enough demand, as it would raise costs for existing consumers due to underutilization of current capacity in industries.

Tauseef H Farooqi, former NEPRA Chairman, noted achievements during his tenure, including a 10-year plan for renewable energy expansion, system reforms for renewable acceptance, and promoting competition among energy distributors. He emphasized the vital need for consistent government policies to attract private sector investment in the energy sector.

Irfan Munawar Gill, Managing Partner at Islamabad Law Chambers, noted similarities between current issues and past challenges. The 1992 restructuring plan, though promising on paper, faced implementation issues.

Copyright Business Recorder, 2024