At a time when a smooth transfer of power is about to take place in Islamabad, President Zardari inaugurated the transfer of electric power to the people of Naudero, though, on a rental basis.
Located in Larkana division, the 51-MW gas-fired Walters rental power plant has been made operational with the help of SSGCs gas supplies, with a hope that it will also generate employment for hundreds of people by bringing light in their lives.
But aside from being just a short-term fix to the overall energy problem, the plant isn economically viable. The Naudero plant has a cost factor of 10.82 cents/kwh, which is way too high for a gas-based power plant. The cost factor of the plant is a staggering 53 percent higher than a gas-based IPP of similar size.
As the government rejoices in the commencement of expensive electricity, the nation finds itself gripped into hours long power outages throughout the day.
Certainly, there would be fewer people complaining, if the rental electricity, which also contributes towards escalating power tariffs, was readily available. That, however, is not the case as contrary to what it claims, the government has not judged the root cause of the problem.
Despite ADBs suggestions to mitigate the deficit through reviving the dead IPPs and implementing the CFL bulb programme, the government seems to be merrily going down the rental road, which leaves the real issue unaddressed.
The power sector circular debt has mounted to an enormous level - its highest ever, according to many industry players - requiring an immediate solution. The solution, however, will be a short-term one, which will only provide breathing space for a limited period, quite similar to the fate of the previous two TFCs.
Even the commercial banks seem reluctant to participate in another round of TFCs, pushing the government to approach Islamic banks for liquidity injection.
Instead, the government should realize that there is no short-term solution to the circular debt problem. Setting up rental plants or issuing bonds will not help a great deal unless the core issue of inefficiencies is resolved.
Technical inefficiencies have to be addressed on a priority basis, with a special focus on improving the infrastructure.
The ADB, while auditing the RPPs also pointed out that investment needs to be made in the existing set up, including the revamping of idle plants, to reduce the transmission and distribution losses. These efforts may take time, but will certainly bear fruits sweeter than the RPPs.
Then there are management inefficiencies, which broadly relates to the inefficient billing and collection system of the power distributors. The state-owned companies share the blame as most of them are time and again found not paying the electricity bills, setting the vicious cycle of circular debt into motion.
There is a dire need to make wholesale changes in the national power set up, both at the managerial and technical level to solve the menace of circular debt. Increasing tariffs alone will not serve the purpose as the end consumers will not necessarily find themselves obliged to pay the bills if tariffs stretch beyond a certain limit.
The elastic consumer behaviour is probably one factor which the government realized, as it deferred the revision in electricity tariffs on April 1, 2010 despite the IMFs conditions. How long can the government withstand IMFs pressure is yet to be seen, but the realization of real issues must hit them today.
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