Federal Finance Minister Ishaq Dar while chairing a meeting on Pakistan Power Sector Investment prospects emphasised the need for an integrated long-term plan to bring down electricity cost and overcome the country's immediate and future energy challenges. The mention of the need for an integrated plan is rather unfortunate given that the party's manifesto clearly and unambiguously states that all related ministries dealing with the power sector would be merged to create an Energy Ministry with the capacity to formulate an integrated plan. More than a year after the PML-N took over the reins of government there has been no move to implement a manifesto promise that requires no opposition support.
Is the nation doomed to suffer energy shortages because of a collective failure of political, executive, and judicial leaderships? After all, there are countries that have to import to meet their energy needs in totality or are geographically flat; such countries are not blessed with rivers flowing from mountains down to the seas to generate hydel power. However, these countries are managing their energy needs efficiently. Dar has called for being realistic and pragmatic at the planning stage to meet future energy demand and prioritise future investment in the light of that demand. No person can disagree with this statement. But some way has to be found to do it! Natural Gas (LNG) became a non-starter due to Supreme Court's ruling on the 'Mashal' project. Instead of importing LNG at less than 10 dollar per metric ton Pakistan may end up importing LNG for 17 dollars per metric ton. Kalabagh Dam envisioned by the late Zulfiqar Ali Bhutto in the early 70s remains a non-starter to this date. General Ziaul Haq used it to promote inter-province disharmony. Emphasis of the present government appears to be on imported coal. Despite attractive returns of 34 percent on equity and 17/18 percent IRR (on the template) projects based on coal would only commence production in six years. Big dams may take even more time to come to fruition (around 10 years). Until then people would continue to suffer.
The country is facing this monumental problem because the provinces have been fighting over construction of dams for over three decades. With the result, our dependence on domestically-produced natural gas and imported furnace fuel oil has increased manifold. In 2007, there was a growing realisation that the fuel-mix needs to be corrected; in order to keep the cost of production of electricity at realistic levels. This was the recommendation of the Farooq Rahmatullah Committee.
Instead of conducting environmental studies for impact of global warming on the glaciers that provide bulk of water to our rivers and, giving top priority to import of natural gas in the face of its depleting domestic production, the PPP-led government appeared to be gung-ho on setting up rental power projects. Fortunately, the Supreme Court ruled against the process followed for rental power. The court also ruled that import of Liquefied Natural Gas (LNG) under the Mashal programme needed to be rethought through; unfortunately; however, ECC in its wisdom decided to scrap the process.
There is ample evidence that justifies Dar's emphasis on enhancing generation through using cheap fuels like water and other indigenous sources of fuel like coal and gas rather than the current heavy reliance on the expensive furnace oil-based Independent Power Plants (IPPs) that has raised the cost of electricity generation in the country. Unfortunately, however, there is mounting evidence that the incumbent government is engaged in setting up generation plants which, though based on cheap fuels, would actually fuel costs of generation as well as environment degradation based on the location of choice. It is extremely disturbing in this context that Punjab Chief Minister Shahbaz Sharif, who is a member of the Federal Cabinet Committee on Energy, got approval from the Prime Minister to establish coal-fired power plants in Punjab - an area which is not contiguous to either any indigenous source of coal or a port where imported coal would arrive. Transporting coal from either local coal mines or indeed from Karachi port is an extremely expensive proposition and would raise the per unit cost of electricity. Moreover, neither Karachi port nor Pakistan Railways has enough capacity or indeed expertise to minimise the health issues that would undoubtedly surface amongst those who load/unload coal. One can assume that Shahbaz Sharif's objective was to make Punjab self-sufficient in energy. However, one must not lose sight of the fact that the centre represents the interests of the federation and must take decisions that would ensure that the economic and internal rate of return of a project is maximised. Therefore, the objective of the federal energy committee must be to ensure that projects are cost-effective. The Finance Minister had reportedly expressed concerns about locating coal-fired plants in Punjab but he was overruled. In this context, one would sincerely hope that the federal cabinet in general and the Punjab Chief Minister in particular revisit this flawed policy and instead agree to set up coal-fired plants near a major port or the local coal source.
The opposition is increasingly banking on people's woes in relation to power outages in Punjab and KPK; even Sindh is showing hostility towards Islamabad. Unscheduled loadshedding and frequent power breakdowns throughout the country are order of the day. Captive power based on imported POL products whether in industry or commercial concerns and in some cases even residential results in higher import bill for POL products and they produce electricity which is more expensive. Industry in Punjab continues to suffer mainly on account of the 18th Constitutional Amendment giving pre-emption right to a province on production of natural gas.
Frequent increases in electricity tariff have further exacerbated revenue collection. Provinces are reluctant to accept the verdict of Federal Adjuster to collect the electricity bills related to organisations under them. As a result, the amount of unpaid electricity bills is piling up and there seems to be no end to the bloating of circular debt. People had voted PML-N into power as they felt the party would be better managers than its predecessors - PML (Q) and PPP. Nawaz Sharif has disappointed them. Their ordeal brings to one's mind the famous remarks of Alexander Pope. According to him "[B]lessed is he who expects nothing, for he shall never be disappointed".
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