Loadshedding turns into fiasco, but IPPs got their big cheque

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ISLAMABAD: All the initial assessments and working of the PML-N to reduce load shedding have turned out to be a complete fiasco amid fears that if the government fails to raise the power tariff besides reducing the line losses/power theft and launching quick reforms, the haunting threat of circular debt would re-emerge.


PML-N is in its post-election homework had prepared a strategy to considerably reduce the load shedding hours during the first months of the party’s rule but it did not happen. Later, after the formation of its government, it worked out a short term plan where it was indicated that during the month of Ramadan and from October 2013 onward the load shedding would be reduced to 8 hours a day but it too did not happen either.


What has happened rather with a lightning speed is that a huge amount of over Rs320 billion has been paid out to IPPs. The IPPs have got their money, thanks to their top members who are key figures in all decision-making in the government, but the rest remains as it is.


The PML-N, which has been generally guided and fed on power issue by, what a source called, “power sector quacks”, has now started realising that the task is too complex and complicated. On this situation, Prime Minister Nawaz Sharif seems perturbed, who wanted his first televised speech to the nation to be focused on power crisis.


Initially the prime minister wanted to address the nation soon after his becoming chief executive for third term but it was delayed as the things were found different as compared to what was calculated by his “power sector quacks” before his taking over.


Later while chairing a high level energy meeting a few days before he left for his China visit, the prime minister hinted during the meeting to unveil in his address to the nation his government’s energy strategy after his China visit. He was assured in the same meeting that despite having being a tough task, the government would bring down the load shedding period to six to eight hours during Ramadan and from Oct 2013 onward.


But again no such announcement came from the prime minister. Instead the Information Minister Pervaiz Rashid addressed a media briefing and made the claim that following prime minister’s direction there would be no load shedding during Iftar, Sehri and Taraveeh timings. But it too turned out to be a false promise.


Now when load shedding continues to haunt the nation for long hours, in cases up to 18 hours, some even within the PML-N have started discussing Shahbaz Sharif as the only person who could deliver. But it is said that in the absence of Shahbaz Sharif, who would lead Punjab.


In case of failure of the government strategy- which contains different measures to increase power production, reduce line losses and power theft, shift to low cost power production- the government could get back into the vicious circle of circular debt.


It is said that if things continued as they were in the past, the circular debt would rise to as high as Rs700 billion by next year despite having been cleared now by the government.


It is said that things will improve only if the government reduces power theft/line losses, ensures recoveries, reduces cost of power production and increases the electricity rates. Increase in power tariff is even included in the conditions set by the IMF but, it is said that without giving any relief to the masses in prolonged load shedding hours such an option would be politically hard to swallow for the newly elected regime.


The PM was recently told that the circular debt was actually the recurring losses of the power sector because of line losses/power theft/non-recoveries and for the reason that the government was actually selling electricity at 9 Cents per unit while it cost the government 15 Cents.


What has not been explained that if this debt has been caused because of the price, why a huge amount was paid in such a hurry to the IPPs, without any audit reports and without obtaining guarantees that no such losses will be compensated in future?


The meeting was also told that the government loses 6 Cents per unit as subsidy but does not have the money to pay to the IPPs and oil suppliers, which results into circular debt. In the current fiscal year, it is said that the circular debt was around Rs500 billion but was based on 12,000MWs of average generation of electricity. In the next fiscal year, it is said that the power generation is expected to increase because of the huge payments made to the IPPs and oil suppliers. If corrective measures are not taken and power sector reforms not implemented, the circular debt for the next year is feared to reach the figure of Rs650-700 billion.


At the current price and cost difference and in view of the present production, the current monthly loss is Rs45 billion. It was said that the only way to reduce this loss was to change the dynamics of price vs cost of energy.


Later, however, the power rates could be reduced by shifting from thermal (petrol) production to coal, gas and water.


Petrol is the most expensive and water is the cheapest, the meeting was told. But shifting the fuel mix will take time and tough decisions are required to be taken like stopping gas for CNG and fertiliser sectors and giving it to the IPPs and industry.


The other way to reduce the cost is to stop theft and inefficiency. It is estimated that the loss of 20 percent can be made up by effectively addressing this area.

Courtesy:  The News

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