EDITORIAL: The power sector problems have compounded over time due to unplanned and expensive growth in power generation whilst the transmission and distribution capacity did not grow in tandem and poor governance persisted.
Electricity prices have now become unaffordable for almost all segments of society, including big and small businesses, middle and lower-middle class households. There is a widespread outcry against the recent increase in power tariffs.
It is important to note that reforms in this sector have so far remained elusive owing to a variety of reasons. There have been talks about this objective of successive governments for many years; but nothing of the kind has emerged or materialised so far.
Selective decisions to augment power production capacity have only exacerbated the problem. Now the chickens have come home to roost.
Reportedly, the Power Division has started working on sorting out 23 fault lines. When the work is planned to happen across the board, the much-needed focus is usually missing.
History suggests that the Power Division has repeatedly failed to bring about any meaningful reforms. It’s the same party’s government that was in power when the bulk of this mess was created.
It’s almost the same set of bureaucrats responsible for the mess who are now advocating reforms. There are two power policies -– 1994 and 2015 — whose after-effects have hurt the economy and consumers alike.
Interestingly, the parties responsible for these power policies are in power today.
The questions to be raised should be when the power projects under 2015 policy were decided, why did the government decide to ignore the fact that too many projects were being added to the national grid in a very short span of time? Why didn’t they go about increasing the transmission capacity to match the growing generation capacity?
There were already two nuclear power projects with the help of Chinese that were being established prior to the CPEC (China Pakistan Economic Corridor), and hydel extension was on the cards as well. Then the federal and provincial governments decided to come up with three RLNG plants. And under the CPEC, the rollout of the much delayed Thar coal projects was initiated.
When all the afore-stated plants were in the pipeline, why then three power plants of 1320MW based on imported coal were set up? The Chinese were reluctant to do so – especially, the one in Sahiwal. However, the then PML-N government insisted on it and had paid top dollars in returns and insurance to lure the Chinese.
Why did the government decide to install them? And the same people are calling for the conversion of these to local coal; a reform!
Now that the imported coal projects are installed and the consumers are paying hefty capacity payment charges through their noses, the production on imported coal is a mere 15-20 percent while the fuel cost is around Rs15/unit. On the other hand, the government is using over 65 percent of RLNG plants where the fuel cost is roughly Rs25/unit.
The question is: why is the supposedly “cheaper” production on imported coal higher than expensive imported RLNG? This is because the then PML-N government made a long-term contract of purchasing RLNG every month. That was topped up by another contract in PTI’s tenure.
Now we must buy 9 cargoes a month from Qatar, and there is no other demand than to run expensive RLNG plants because these contracts are in ‘Take or Pay’ mode. And that is taking pipeline capacity while the production of cheap domestic gas has to be halted.
To top it all, the overall higher capacity is added to the system in the south while the majority of consumption takes place in the north. However, not enough transmission lines are installed to transmit that electricity which causes blackouts in winters.
To avoid this, expensive Furnace Oil power at Rs40-50/units in winters is produced while almost zero variable cost nuclear plants are kept underutilized. Now the Power Division is mulling enhancing the transmission capacity, the question is why was this not done when the power plants were coming online?
There is a talk about wheeling and having the system and market operators. However, the government proposes wheeling charges that are way too high because it’s higher transmission and distribution losses.
Needless to say, reforms are never easy. They are hard to implement particularly when the bureaucracy that is in the forefront of the reform process is not ready to concede space or control. Little do, however, they realise that they cannot have the cake and eat it.
Copyright Business Recorder, 2024
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