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Dr.Akmal Hussain
Newspaper: The Express Tribune
Dated: Thursday, 30 May 2013

The suffering of the people has reached a peak as they are caught in the vice of record high summer temperatures and acute power outages. Let us indicate some urgent measures that the new government can undertake to mitigate the misery of citizens.

The gap between existing power generation and average demand (reported to be about 4,978 megawatts) is due to four proximate factors: First substantial underutilization of the available power production capacity. This is essentially because the power producers in both the public and private sectors have not received sufficient payment of their dues to even enable them to buy furnace oil. So most of the oil based thermal power plants are shut down. Second the available capacity is substantially below the installed capacity because over the years the public sector power producers have failed to invest in maintenance and up gradation of plant and equipment due to the government’s budgetary mismanagement. Private sector power producers have not invested in maintenance and up gradation either, due to uncertainty about future profit prospects. Consequently most production units have gone into disrepair with a consequent capacity constraint. Third, a combination of obsolete transmission technology and widespread theft of electricity has resulted in losses of electricity during transmission of as much as 33 percent in some areas. Fourth, there is load mismanagement. The distribution companies have not yet installed meters that could keep load managers informed about the electricity flowing through the system on an hourly rather than a monthly basis as at present. Consequently power distribution companies do not have the information for load management in response to variations in power received during the twenty four hour cycle. So power is squeezed out from an already stressed system during short term supply variations to meet average load shedding targets. This causes tripping of power plants due to overload thereby further reducing supply. Similarly the failure to install “smart meters” for consumers means that peak load pricing cannot be undertaken. Hence consumers cannot rationalize their pattern of electricity consumption during a twenty four hour cycle.

The citizens are at the end of their tether. Providing quick relief will require the following initiatives with political will and high quality governance: First, as I had suggested during a television program a few weeks ago, Pakistan needs to import from Saudi Arabia on a deferred payment basis, oil worth USD 4 billion a year over the next three years to run its oil based thermal power plants. Nimble diplomacy is required to get this done quickly, so that at least the available power production capacity can be brought online. The funds required (about Rs. 500 billion) to reduce circular debt to tolerable levels also need to be mobilized. It means borrowing in the short term. In the medium term the government can save Rs. 400 billion a year that it is currently spending to finance the losses of public sector entities, by restructuring and privatizing them. Another Rs. 450 billion that are currently locked up in government commodity trading can be mobilized by privatizing trading of commodities such as wheat and fertilizers.

Second the machine and equipment requirements for raising available capacity to the installed capacity level need to be determined for each production unit. The necessary finance and management of the supply chain for fulfilling these requirements must be made available without delay.

Third meters for monitoring hourly supply flowing into the distribution system should be installed. At the same time those personnel who are alleged to be selling electricity illegally on the basis of bribery, should be disciplined. Indeed the entire management structure and operating procedures of distribution companies should be reviewed.

Fourth smart meters should be installed for consumers to enable peak load pricing. This will mean providing electricity during peak load periods at a higher price than during off peak periods. This will incentivize both businesses and households to adjust the temporal pattern of their consumption so as to reduce electricity consumption and hence load, during peak hours.

Providing first aid to a people in pain will require swift initiatives in foreign policy, financial management and governance of the power sector.


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