by Azhar Bukhari
The countrymen, willingly or unwillingly, will have to pay Rs 12-14 per unit, if the government continues following the current electricity generation process, as 70 per cent of total power production is coming from thermal power plants either using Natural Gas or Furnace oil, while the cost of furnace oil for generating one unit of electricity is about Rs 16-18.
The experts of energy sector have revealed that total installed power production capacity in country is about 19,500 MW, out of which Hydel Power is only 6,000 MW, balance of 13,500 MW is thermal using Furnace Oil. Currently, total demand of power in country is stood at 15,000 MW and the production is varying between 11,000 to 12,000 MW, as the gap between demand and supply is of about 3,000 to 4,000 MW.
A prominent analyst on power issues, on the conditions of anonymity as he considers advocating increases in tariff could go wrong to his repute said either the present government nor the previous government was responsible for current power crisis, it was the entire electricity generation system which brought up an issue to a young crisis.
He said that a comparatively cheaper fossil fuel, natural gas was to be provided for 5,800 MW to various thermal plants, but in actual fact much less gas is being made available, the deficiency is being filled through high-cost furnace oil. It is worth to mention here that in the recent past, only furnace oil was used as fuel for about 9000 MW generation.
Current price of furnace oil is about Rs 39,500 to 40,000 per ton, which amounts upto Rs 39.5 per kg. On an average one kg of furnace oil produces 3.8 kWh of electricity. Therefore, one unit (kWh) of the electricity produced by all thermal plants using furnace oil is Rs 16 per unit. According to WAPDA/IPP agreement, the private power producers will charge WAPDA the actual fuel cost for which they have a direct contract with PSO.
Focusing only how to counter terrorism, the federal government is also constantly ignoring writing on the wall, which is clearly indicating that Pakistan has entered into an arena of power crisis. Admitting this reality, Prime Minister Gilani has told the countrymen that electricity was not such a thing which could be bought from the market it is to be generated and the process of electricity generation takes time. This is why the elected opposition is hesitant to stand with the people on the issue.
Thus, coping with energy problems is no longer a matter of days or months, even though the government would enhance the production yet it could not sustain current power tariff, as the only solution lies in complete overhauling of electricity generation structure.
However, the production cost of furnace oil electricity is Rs 16 per unit but adding to it the transmission, distribution cost (including loses), the total cost of such electricity works out to approximately Rs 20 per kWh. The difference between WAPDA tariff and the furnace oil electricity is Rs15 per kWh. It is estimated that the country consumes at least 27 billion units of electricity produced annually through furnace oil, which amounts to the total deficit of Rs 435 Billion. If WAPDA has to balance its books it would require a subsidy of Rs 435 Billion. This deficit is somewhat reduced due to cheap power produced through hydel energy and natural gas, but the deficit cannot change substantially, unless bulk of electricity is produced through hydel energy.
A deficit of Rs 300-350 Billion cannot be sustained, the government does not have resources to pay such a huge subsidy, the only remaining way to decrease the deficit is to increase the power tariff, which would not earn good name for the federal government and could also cost its regime. The cost of production is already high at red level in the country, if the government decide to further increase power tariff, it could reversely effect large scale manufacturing sector resulting more difficulties both for countrymen and the federal government.
In the absence of extremely heavy subsidy, WAPDA has to delay payments to IPPs and also to the oil companies. The result is that IPPs are now producing much less electricity than their capacity.
Thus Pakistan can’t afford electricity produced through oil, but interestingly Prime Minister, Yousaf Raza Gilani has directed Ministry of Water and Power to ensure daily delivery of 35,000 tons of furnace oil for power plants, which would cost Rs 41.475 billions per month.
According to the experts, another factor of increasing cost of power production is that the IPPs, and WAPDA owned thermal plants are averaging about 50 percent plant factor, as they are not being used to their potential level. It is estimated that 70 to 80 percent plant factor is quite feasible and require only better maintenance of such plants. Moreover, a higher plant factor on these power stations can provide 20 to 30 percent more energy, which could evade the current shortage to a certain extent. Improving the plant factor of the existing plants is far more economical than setting up new plants, although new plants will still be needed.
The current power crisis is grossly due to high dependency on precious fossil fuels, since the government is busy only to counter terrorism the country has to prepare itself at least for the next several years to cope with power crisis, as no immediate cheaper alternate solutions are available. The only residual way for the government to decrease both fiscal and WAPDA deficit is to increase the power tariff.
Moreover, prominent Hydel Projects have not been undertaken, neither the indigenous coal mining has started, investments in the existing as well as new gas field have been lacking. The policy orientation needs a drastic modification and indigenous resource like hydel energy production as well as development of coal mining and new gas fields should be the top priority.
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