Import of generators and other types of power equipment witnessed a steep rise of 153 percent in January this year over the corresponding month of last year, thanks largely to the worsening power crisis in the country. In real terms, the import bill rose to $122.132 million as compared to $48.207 in January last year.
This in a way can be taken as a measure of the deepening power crisis that has hit the country. The Kesc-Wapda row over payment of arrears has led to massive production losses in addition to causing inconvenience to Karachiites. In the first seven months of FY08, import of power generation machinery went up by 21 percent to $517.651 million, as compared to $428.647 million in the corresponding period of the preceding year, marking a jump of $89.004 million.
Even household and industrial consumers are now not largely relying on power utilities, including Kesc and Wapda after their bad experience over the last few years. This augurs well neither for the country's industrial productivity nor for competitiveness of its economy, as reliance on the expensive thermal option, which the use of generators represents, is obviously not the best of options available to us.
The blow delivered to Karachi's industry by sudden cutting off of 300-MW power supply because of the non-payment by Kesc of Rs 34.8 billion it owes to Wapda has apparently convinced Karachiites that they will have to develop self-sufficiency in power generation.
Hence the "hot sale" of power generators. But can such desperate measures show us the way out of the power generation cul-de-sac in which we seem to have landed? Interestingly, the Kesc CEO had warned about two weeks ago that the shortage of around 200 megawatts in Karachi would escalate in the coming summer months if Wapda failed to provide 500 megawatts of electricity daily. (And the prediction has come true within a fortnight.) This shows the fragile supply-demand equilibrium on which depends our industrial productivity.
The issue of payment of arrears by Kesc to Wapda could have been amicably resolved if the high-ups of the two utilities had demonstrated forbearance and restraint in the larger interest of the economy. (One should recall here the "hot sale" of emergency tube-lights all over the country when massive load-shedding had regularly plunged large swathes of the country into darkness. Mercifully, the ordeal is now over to a large extent.) As one analyst has argued, consumers who pay their bills on time are not, or should not be considered a party to the "running quarrel" between Wapda and Kesc, an issue that ought to have been sorted out amicably to cause minimum possible loss to the economy.
There is a perception that Karachi's worsening power crisis is a result of hurried and imprudent sell-off of Kesc in 2005, which has since been compounded by failure of the new owners to invest $500 million to bring about financial and operational turnaround of the company. Secondly, Kesc's transmission and distribution network has largely remained unattended, with the line and other losses reportedly running as high as 45 percent.
(There is also a perception that 'the mismanagement' at Kesc bears similarity to the Indian experience of privatising electricity distribution in Orissa, which had resulted in the piling up of huge arrears, and despite muted warnings the Kesc privatisation went ahead.) As we have argued in this space earlier, Kesc has been running almost perpetually in financial loss.
According to available figures, the company posted a loss of Rs 12.787 billion in 1999-2000, which increased to Rs 16.201 billion in 2000-01. In 2002, the utility sustained a loss of Rs 17.741 billion and a major part of it was due to the high interest cost incurred on borrowings. The government had reduced Kesc's debt through a debt-equity swap, the beneficial impact of which was evident from the reduced loss for 2002-03, though the momentum of the benefit could not be sustained.
Viewed in the overall perspective, it has been estimated that the power supply-demand gap will widen to 5,529 megawatts by 2009-10 when firm electricity supply will be 15,055 megawatts against a peak demand of 20,584 megawatts. Clearly, lack of additional generation capacity due to non-implementation or delayed implementation of power projects, particularly in the hydel and coal sectors, as well as the worn-out distribution infrastructure have aggravated the energy crisis to such an extent that attempts are being made to make up the shortfall through use of electricity generators. There is an urgent need for the government to initiate fast-track power projects, to rid the country of the tightening energy squeeze.