The other power struggle

Power shortage has been one of the chronic problems hampering Pakistan's socio-economic growth since late 1980s. The problem had assumed such acute dimensions that power supply fell short of demand by almost 2000MW during peak load hours by mid-1980s. The main reason for this crisis being, while the first Afghan war related flood of incoming dollars had given rise to a steep increase in electricity consumption as citizens at large began using air conditioners, refrigerators and other white goods in abundance, the military government of General Zia did not pay any attention to adding to the generating capacity.
Electronic goods made in Japan used to be brought in by incoming overseas workers earning their keep in oil-rich Middle East and sold in the local market at high margins as import of these goods was officially banned. This was legal in those days as according to the then finance minister the late Ghulam Ishaq Khan, at least the official dollars were not being spent on the 'import' of these items. In fact, in major cities in Pakistan shopping plazas of electronic items whose import was officially banned were doing roaring business without any let or hindrance.
On a routine basis, this resulted in forced interruptions in the supply of electricity to consumers during peak hours resulting in load shedding. The unreliable power supply shattered the industrial progress. There was a gap between demand and supply due to the rapid increase in electricity demand (estimated to be growing at a rate of 7-8 % per annum at that time).
This situation called for immediate intervention by the government through adoption of policy measures aimed at massive resource mobilization for investment in the power/energy sector. In fact, the government in late 80s was forced to induct private sector investment in the power sector by the World Bank. The Bank had also opened a new lending window exclusively for power generation in the private sector.
Developing power generation capacity is very capital intensive. For example, the capital requirements for a deficit of 5000 MW estimated in those days was around US$ 6 billion. Such an amount cannot be mobilized out the annual budget of federal government. As such in late eighties the Government of Pakistan made in principle decision to seek private sector investment in power generation. This was made doubly necessary as the World Bank had, in view of massive cost escalation in Bank aided power projects because of unnecessary delays, corruption and inefficiencies in WAPDA, stopped its concessional assistance to the Authority's future plans for adding to generating capacity.
In those days, corruption in Wapda was so massive that even some of its chairmen were caught with their hands in the till. In 2013 a former general of the Pakistan Army returned Rs 200 millions of misappropriated funds in a plea bargain to the National Accountability Bureau (NAB). Lt-General Zahid Ali Akbar (retd) commanded the Rawalpindi Corps and remained Wapda chairman from 1987 to 1992 as well as serving as the Pakistan Cricket Board chairman. He was accused of corruption and having assets beyond his known sources. The NAB received his confessional statement and Rs 200 million which was deposited in the national treasury. Lt-General Zahid Ali Akbar (retd) was arrested through Interpol when he was entering Bosnia from Croatia but due to his citizenship of the United Kingdom he was shifted from Bosnia to Britain. According to NAB documents, Lt-General Zahid Ali Akbar (retd) had 77 bank accounts in which more than Rs 200 million was deposited and these bank accounts were in the name of Zahid Ali Akbar, his close relatives and in the name of different companies.
Long and tedious experimentations by various governmental agencies on part time basis with HUBCO (the first private sector power generation project) and other prospective Independent power Producers (IPPs) in late 1980s convinced the government to create a dedicated organization having roots in government but having a corporate look that could provide a suitable interface to private sector entrepreneurs, their consultants, lawyers, and lenders feel easy to approach, Private Power and Infrastructure Board (PPIB) was, thus, created as a dedicated one window facilitator for attracting private investments in power sector.
The Bulk Power Tariff (BPT) offered by Pakistan to the IPPs inducted under the 1994 Power Policy was said to be comparable to the IPP tariffs in other Asian countries. The increase in tariff with time is said to be mainly due to increase in the prices of furnace oil and gas, and devaluation of the Pak rupee.
But this was not the end of the story. It was just the beginning as when the second Afghan war-related dollars started flooding the country after the 9/11, the then military government of General Musharraf sent the nation on another massive consumer spending spree. This time even those earning not more than Rs 50,000 a month could buy a car, a washing machine, a motorbike, a fridge, an air-conditioner, etc., on easy instalments offered by the commercial banks. Once again we were consuming energy by leaps and bounds while not a single MW of generating capacity was being added to the power sector. This obviously led to a second round of massive load shedding by 2007-08 forcing many industries to close down as the price of available electricity had sky-rocketed.
Meanwhile, the global collapse of the economy following the failure of the mortgage economy of the rich world had caused the world oil prices to go through the ceiling reaching almost $ 150 a barrel.
This crisis was inherited by the incoming PPP government, led by President Asif Ali Zardari. His regime suffered from declining flow of concessional assistance because the world itself had gone into a lengthy recession mode with the multilateral aid agencies working overtime to save capitalism itself from getting the drubbing of its life-time. In fact, contrary to the prescription of the Washington Consensus in such circumstances, new money was created by the rich countries to save their economies and revive a virtually collapsing capitalism.
So, by the time we entered the last IMF programme in 2014, Pakistan was suffering from massive load-shedding accompanied by galloping circular debt which today amounts to Rs795 billion. This amount is distributed among 30 private power projects with installed capacity of about 7410MW.
Today we seem to have enough generation capacity but its output is so costly, mainly due to economically illogical terms enjoyed by the IPPs that the entire economy seems to be collapsing under its weight. And it seems without first getting out of the circular debt trap there appears to be no way Pakistan could reset its economy back on the road to progress and prosperity.
And in order to achieve a modicum of progress in the shortest possible time Pakistan would need first to retrieve the file that contains the German Development Department, GTZ's mid-1990s comprehensive paper on exploiting the small and medium waterfalls in KP which it was estimated in those days were capable of producing as much as 40,000MW of electricity with small investments and using appropriate local technology. All impediments in the way of approaching the matter should be cleared forthwith. Once these power projects come on line and are linked to the national grid we could resort to the luxury of completely stopping purchase of electricity from the IPPs.
Estimated hydropower potential in Pakistan is about 60,000MW and projects with installed capacity of 6928MW have been developed so far. Tarbela (3478MW), Ghazi-Barotha (1450MW) and Mangla (1000MW) are the major hydropower plants in operation in Pakistan. Numerous studies have been conducted all of which have concluded that all coal reserves of Pakistan are suitable for power generation. Pakistan's total coal reserves are 186,007 million tons. The biggest coal reserve of Thar which lies in Sindh has an estimated potential of 175,506 million tons and preliminary studies suggest that Thar is capable of generating 100,000MW for two centuries.