Power sector: Work begins to remove major bottlenecks

ISLAMABAD: The Power Division has reportedly started working on sorting out 23 fault lines, identified in the country’s generation, transmission and distribution systems, sources in the Power Division told Business Recorder.

The proposed reforms have also been shared with the prime minister and Special Investment Facilitation Council (SIFC).

The sources said in generation, the Power Division has identified four factors; i.e., imported fuel substitution, optimal utilisation of fuel and capacity, reduction in capacity payment burden and privatisation; whereas in transmission improvement of North-South transmission capacity and governance are considered key bottlenecks.

Power mess: It is beyond capacity charges

The key issue, due to which the authorities are worried about, is uncontrolled power sector circular debt which is over Rs 2.4 trillion, which now the government says is an unpaid liability, which is not recoverable.

“Circular debt is unpaid liabilities, of which only Rs 100 billion is circular, the remaining is liability. No amount will be recovered. If it was circular, then some amount could have been returned,” said Secretary Power Rashid Mahmood Langrial. An amount of about Rs 100 billion has been added to the circular debt during FY 2023-24 despite the fact that government had made a commitment to the IMF and World Bank that circular debt will be contained at Rs 2.310 trillion.

The sources said, in distribution system the identified issues are higher losses, inefficiency, and higher tariff and tax reforms.

Power Division is likely to share an overview of its plan with the Senate Standing Committee on Power scheduled for August 6, 2024.

According to the strategy on imported fuel substitution, addition of 2,400-MW solar generation, conversion of imported coal power plants and utilising auxiliary power for mining is on the cards.

For optimal utilisation of fuel and capacity, the government has planned to implement WACOG, shifting of captive units to the National Grid, economic load shedding and regional incentive package.

The sources said, debt restructuring is also part of the reforms package meant to reduce capacity payment burden.

The plan says that wheeling and open competitive markets and privatisation of Generation Companies (Gencos) including Nandipur and Guddu is part of the privatisation and markets reforms. In transmission, plans are being made to remove transmission constraints and enhance margins of blackout probability for improving North-South Transmission Capacity, the sources said, adding that for improvement in governance, institutional restructuring of NTDC/ Market Operator/ System Operator is being considered.

In distribution system, for reduction of losses and service improvement, pre-privatisation intervention, private participation in distribution companies, resolution of AJK, FATA and Balochistan tube-well issue and special economic zones are the key factors, on which working is also under progress whereas for energy efficiency and conservation, replacement of inefficient fans is also on the cards.

For tariff reforms and tax reforms, Power Division is working on reduction of industrial cross subsidy, provision of subsidy to protected domestic consumers through social protection programs, tariff restructuring and tax restructuring.

Minister for Power, Awais Leghari had requested Chairman Senate Standing Committee, Mohsin Aziz to allow Power Division to give a presentation on fault lines of power sector and measures under consideration to bring improvement.

Minister argued that the government is not in favour of sale and purchase of electricity itself and wants to activate CTBCM (Competitive Trading Bilateral Contracts Market). NEPRA is also all set to hold public hearing on it.

Copyright Business Recorder, 2024