Uncertainty looming over Pakistan’s power sector
Muhammad Saleem, 37, grows wheat, cumin, watermelons and onions in Balochistan’s Nushki district. He uses an electricity-run tube well to irrigate 100 acres of land that he owns. Over the last several years, he has seen his crops suffer every season due to water shortage since availability of electricity for his tube well has become highly uncertain. Not only have scheduled hours for power outages been long, unscheduled outages have become even longer.
“We get electricity hardly six hours a day,” says Saleem. “That is insufficient to cater to our irrigation needs.” During peak seasons for such crops as wheat, cumin, watermelons and onions – that coincide with the summer months of May, June, July, August and September – unscheduled power outages can be as long as four to five days. This ruins crops and causes grave financial loss to farmers, he says.
Farmers in a number of areas in north-western and central Balochistan, such as Loralai (where almond farming has virtually collapsed), Chagai, Mangochar, Pishin and Kalat, have migrated to cities where they work as vegetable/fruit vendors and shop assistants, mostly living with relatives. Their farms are turning into a barren land mass because they are unable to irrigate them, Saleem says.
Even in Quetta, Balochistan’s provincial capital, electricity is not available five to six hours every day. In some areas of the city, duration for outages stretches to eight hours a day and this has been the case since 2007. “Load-shedding has brought me to the brink of closing down my business,” says Ghafoor Ahmed, who runs a tailoring shop on Sariab Road. While most other local shopkeepers use diesel generators to produce their own electricity during outages, Ahmed says he “cannot afford a generator”.
Shopkeepers, flour mill owners and those associated with the cottage industry have been affected the most. Tariq Mehmood, a former furniture dealer, has closed down his “furniture workshop due to non-availability of uninterrupted power” supply. “I was not able to fulfil commitments to my customers,” he says.
Also, unlike many other parts of Pakistan where decrease in temperature reduces electricity’s demand and subsequently decreases load-shedding, electricity vanishes in Quetta and many northern and central parts of Balochistan the moment it starts to rain and snow. Whenever it rained and snowed heavily in January and February this year in these parts, inclement weather disrupted power transmission lines and people had to make do without electricity for days.
Whenever people pray for rain and snowfall (which has become rarer in recent years), they also pray for continuous supply of electricity, says Mirza Nadeem Baig, a 56-year-old shopkeeper in a market on Quetta’s Jinnah Road.
Whenever people pray for rain and snowfall (which has become rarer in recent years), they also pray for continuous supply of electricity.
Officials of the Quetta Electric Supply Company (Qesco) do not deny these claims and complaints. They acknowledge that Balochistan is not receiving electricity “according to its requirement”. Rehmatullah Baloch, Qesco’s chief executive officer, says the province needs around 1,650 megawatts of electricity but is getting only 650 megawatts from the national grid.
That is only half the problem, though. Even if the national grid wants to transmit to Balochistan all the electricity it requires, Baloch says, transmission lines cannot handle that load. “We could only get up to 900-950 megawatts when we tried to [increase the transmission of electricity],” he says. “When we tried to get more electricity than that, the main transmission lines started tripping.”
A related problem is electricity lost and stolen during transmission. The province loses anywhere between 20 per cent and 30 per cent of its electricity (depending upon the area and the state of the transmission lines) to these two factors.
And, lastly, electricity bills amounting to 190 billion rupees have remained unpaid for the last seven to eight years in Balochistan. Owners of 29,000 or so tube wells comprise the largest number of these defaulters, even when the provision of electricity to them remains heavily subsidised: every tube well operator gets 10,000 units of electricity each month at a lump sum price of 75,000 rupees but he pays only 10,000 rupees out of it.
Of the remaining amount, the provincial government pays 60 per cent and the federal government pays 40 per cent. The total amount of this subsidy reaches 22 billion rupees every year. All these problems are emblematic of what is wrong with the electricity sector, not just in Balochistan but all over Pakistan. Are there any efforts to fix them?
Mohammad Bilal clambers into the back seat of a dusty pickup truck making its way from Muzaffarabad up into Neelum Valley in Azad Jammu and Kashmir. He courteously apologises for the state of the vehicle. Conditions here are rough, he says.
A stout man in his mid-forties with an untidy beard, Bilal serves as deputy director (geology) at the Neelum-Jhelum Hydropower Project. He hails from a Gilgit Baltistan village near Chilas. Bilal received his college education from Muzaffarabad and when work commenced on the project almost nine years ago, he left his ancestral home to shift to his workplace along with his family.
We twist around snow-capped mountains and race up a dirt road as the site camp for Neelum-Jhelum Hydropower Project comes into view: Pakistani offices, Chinese offices, temporary access roads, barracks for security personnel, living quarters, kitchens. Bilal’s own work includes analysing various types of soil, rock and fault lines at different levels in the ground to ascertain which area is suitable for which kind of construction.
Neelum-Jhelum Hydropower Project is small compared to Tarbela Dam — firstly, because its purpose is just to divert, not store, water; secondly, Tarbela happens to be the largest earth-filled dam in the world. But it is hard to forget that at least seven people have lost their lives building the former and at least another 19 have been injured in multiple accidents at the site.
Donning a white construction helmet, Bilal tries to explain various parts of the project in layman’s terms. “Water coming from upstream is stopped at the spillway by three floodgates. It is then diverted into six canals where sediment is separated from it before it is channelled into an 11-metre wide tunnel on the side of the mountain.”
He demonstrates on a map how this tunnel slopes down at a gentle gradient, divides into two and then becomes one again, making a total fall of 421 metres before reaching an underground power house, 28 kilometres away from the spillway. After the waterfall runs the power house’s turbine and the national grid gets 969 megawatts of electricity, water will be discharged into the Jhelum river. It is an engineering marvel, he says excitedly.
"We get a lot of criticism for projects like Nandipur and Neelum-Jhelum but these are problems we inherited."
The project was approved back in 1989 at an estimated cost of 15.23 billion rupees. But political foot-dragging and repeated remodelling kept it on hold until 2002, when cost estimates were revised upwards to 84.5 billion rupees.
Then, in 2005, a 7.6-magnitude earthquake struck Azad Jammu and Kashmir and neighbouring parts of Khyber Pakhtunkhwa, leaving at least 86,000 dead and 2.6 million displaced. Its epicentre was a mere eight kilometres away from the site of the project. That forced the planners to factor in the changed geographical and seismic realities.
In 2007, a Chinese consortium consisting of China Gezhouba Group Company Limited and China Machinery Engineering Corporation was awarded the contract to commence construction on the project at an estimated cost of 90.94 billion rupees.
Work began in early 2008 but the estimated cost swelled to 274.8 billion rupees within the next four years. Damaged machinery that required replacing, changing structure of the river after the earthquake and high interest on loans and taxation were some of the reasons cited for the extraordinary hike.
Around the same time, Transparency International Pakistan wrote a letter to the prime minister and heads of National Accountability Bureau, Public Procurement Regulatory Authority, Public Accounts Committee and Water and Power Development Authority (Wapda). The letter alleged that Wapda officials had received kickbacks worth at least 74 million US dollars in the procurement of two tunnel boring machines for the project. The amount was huge since the total cost of the machines – used in order to avoid highly time-consuming manual drilling and blasting – was reported to be about 2.5 times that: 184 million US dollars (excluding insurance).
That did not deter the project’s board of directors to reveal on March 30, 2015 that, under a newly revised proposal, the cost of the project had increased to 414 billion rupees. This revision, again, was done to compensate for the changing technological and geographical needs.
The news prompted a consortium of investors from Kuwait and Saudi Arabia to refuse a 433-million US dollar loan for the project. In the blame game that ensued, Chinese contractors accused Wapda and the government of failing to procure money; Wapda alleged that the contractors had created “design problems” and made costly “mistakes”.
All this wrangling has delayed the completion of the project — first scheduled for 2015, then for 2016, and now for 2018. Each round of delays has exponentially increased the fears of investors and made it all the more difficult for the government to raise money.
A consortium of 16 Pakistani banks came to the government’s rescue in May 2016 and offered a loan of one billion US dollars — that amount still did not cover all the costs, says Nayyar Alauddin, project director for Neelum-Jehlum Hydropower Project.
In its desperation, the government went to China’s Exim Bank which offered a loan of 576 million US dollars, but at an exorbitant seven per cent interest rate. The loan deal is still in the works, he says. This is hampering the long-delayed financial closure of the project which, otherwise, is set to be completed next year.
Even earlier, the government had been employing other methods to raise money. In 2007, it came up with the ingenious idea of collecting a portion of the cost from electricity consumers.
Total money then required for the project was 130 billion rupees so the government imposed a per unit surcharge of 10 paisas on all electricity bills for eight years to raise half of that money.
The surcharge was extended for one more year when the cost of the project inflated to 414 billion rupees in 2015 — and for another 18 months beginning early 2017 as the cost estimate rose to 464 billion rupees.
Electricity consumers have, thus, paid 70 billion rupees over 10 years for a project that is still incomplete and is expected to provide electricity at a very high rate of 20 rupees per unit in the first 10 years of its operations.
Electricity consumers have paid 70 billion rupees over 10 years for a project that is still incomplete and is expected to provide electricity at a very high rate.
Baffling arithmetic aside, Neelum-Jhelum Hydropower Project is strategically crucial for Pakistan. Firstly, it is being built in an area that remains disputed between India and Pakistan. What makes it even more significant from a Pakistani perspective is that a mere 100 kilometres upstream, India is building Kishanganga Hydroelectric Plant on the Neelum river. The plant is scheduled to be completed around the same time as Neelum-Jhelum Hydropower Project.
Pakistan feared Kishanganga Hydroelectric Plant was meant to divert water required for Neelum-Jhelum Hydropower Project — a possible violation of the World Bank-guaranteed Indus Waters Treaty between Islamabad and New Delhi.
That is why Pakistan took the matter to the Permanent Court of Arbitration at The Hague in Netherlands. After almost two years of deliberation, the court ruled in 2013 that India could divert a minimal amount of water to generate power but the country that completed its project first would have priority rights over water usage.
As a former senior Wapda official puts it, Pakistan started pursuing the construction of Neelum-Jhelum Hydropower Project earnestly and aggressively only when it came to realise that it might lose its rights over the water.
Other than that, most people in the industry do not see any serious problems being caused by the Indian project. “It is not big enough to have an impact on our project,” says Bilal. “In any case, there is more than enough water [at least] in the peak summer season to fulfil everybody’s needs and that is also the season when most electricity is required.”
“How far is India from here?” I ask. Bilal points to a snow-capped peak towering over Neelum-Jhelum Hydropower Project: “Behind this mountain.”
Industry veterans nostalgically remember the days when Wapda had jurisdiction over all things related to water and electricity — from dams and canals to power plants, transmission lines and grid stations. It employed a staff of at least 140,000 at its peak circa 2007 and earned enough to cover its own expenses, pay back its loans and yet save money for reinvestment. Over time, though, it became riddled with corruption and incompetence. Its failure to address the perennial shortage of electricity eventually ensured its slow decline.
Zafar Mehmood was Wapda’s chairman for about two and a half years before he tendered his resignation in August last year. He cited personal reasons for his departure but industry insiders suggest Prime Minister Nawaz Sharif was not satisfied with his performance.
Sharif’s political necessity to bring an end to load-shedding before the 2018 elections clashed with persistent delays in power projects — especially at Neelum-Jhelum and in the latest extension of Tarbela.
On a clear winter afternoon, Mehmood walks into the patio at Lahore Gymkhana, a private club for the rich and influential in Lahore. “[Wapda] was known to be a success story,” he begins with a hint of dejection. “It was meant to be an independent institution set up by international experts in 1959. [It was] modelled after the Tennessee Valley Authority in the United States — its wings in East and West Pakistan reported only to the head of the state.”
At the time of Independence, Pakistan was producing only about 50 megawatts of electricity in major cities that had their own small generation and distribution systems. “Some major breakthroughs were achieved with the establishment of Wapda,” says Mehmood. “Beginning with Warsak [Dam],” he says, we built many dams including Mangla and Tarbela that “boosted electricity generation and, as a result, the economy”.
He cites a recent study that places the present net worth of projects completed by Wapda in the first 15 years of its operations at 23 billion US dollars. “All those projects were completed on time and within budget.” Pakistan, he says, was “the second country in Asia after Japan to build a unified national electricity distribution system”.
The downward slide started in 1974 when people from outside Wapda were first brought in to head it, says Mehmood. “Not to say there have been no brilliant individuals since then but Wapda’s greatest time was its initial years.”
Wapda “really hit a bump” with the controversial Kalabagh Dam project on the Indus river in the 1980s, the same time when electricity consumers across Pakistan first experienced load-shedding — or scheduled outage.
The project has been one of the most hotly debated topics in the country since it was first proposed in 1984 and elicits two extreme opinions: “We have to build it for our economic survival” versus “we have to bin it for the survival of our federation.” Although the latter has evidently won, the former has not forgotten or forgiven this ‘indiscretion’.
Khyber Pakhtunkhwa and Sindh are particularly vocal in their opposition to the dam, citing adverse ecological impacts and an unfair distribution of water and royalties. Punjabi politicians, along with a number of bureaucrats, engineers and energy sector experts, have generally spoken for the dam, claiming it will increase Pakistan’s ability to store water during monsoon months for use in drier months (an estimated 80 per cent of Pakistan’s water flows through its rivers in four months over the summer); it will help the country manage floods and will generate much-needed electricity.
General (retd) Pervez Musharraf did try to lobby for the dam but gave up soon enough, says Mehmood. “We were lucky to have initiated Ghazi-Barotha Hydropower Project (a 1,450 megawatt diversion canal power project on the Indus completed in 2003),” he says.
When the power crisis hit in 2004, Mehmood says, we had no project in the pipeline to address it.
Pakistan also set up a number of oil-based private power plants in the mid-1990s, producing surplus electricity for three to four subsequent years. “In 1999, we had 1,000 megawatts of excess electricity,” says Mehmood. “When Atal Bihari Vajpayee came to visit Pakistan that year, India expressed interest in buying electricity from us” though “that did not work out because of a disagreement over tariff”.
That surplus gave the planners a false confidence while the public imagination was still focused firmly on Kalabagh Dam. The result: no investments were made in the electricity sector for an entire decade. When the power crisis hit in 2004, Mehmood says, we had no project in the pipeline to address it.
This was also the time when Pakistan started finding it difficult to arrange money for large infrastructure initiatives, he says. International donors such as the World Bank, Asian Development Bank and European banks had funded the two billion US dollar Ghazi-Barotha Hydropower project but were not willing to do the same for other hydropower projects such as Diamer-Bhasha Dam and Neelum-Jhelum Hydropower Project. “They were not keen to invest because they felt India would object.”
Initial investment in hydropower is steep. A run-of-the-river project such as Neelum-Jhelum Hydropower Project – in simple words, a power station built on a river without an attached reservoir to store water – requires billions of dollars.
If a reservoir is added, costs skyrocket further.“Tarbela, Mangla and even Warsak were not intended for electricity generation but for water storage and irrigation, which justified the huge expense on them,” says Mehmood. “Producing hydroelectricity from them [as a by-product] was, therefore, cheap.”
Wapda has been looking for other ways to produce electricity since the 1980s when it set up its first major thermal plant in Guddu, Sindh. It was to run on furnace oil. Similar plants were set up in Jamshoro in Sindh and in Kot Addu and Muzaffargarh in Punjab. These projects were meant to cover lean hydropower generation during winter and spring months when river flows drastically decrease, leaving little water to run electricity producing turbines, says Mehmood.
Later, private investors, known as independent power producers (IPPs), set up multiple thermal plants. It was with their arrival that Wapda’s monopoly over power generation came to an end. This necessitated a change in the authority’s structure as well.
Nawaz Sharif, who the prime minister then too, approached the World Bank in the late 1990s for ideas on how to restructure Wapda. After a slow transition, the organisation underwent “bifurcation” in 2007 — separating generation of electricity from transmission and distribution. Wapda’s remit was reduced to generating only hydropower.
All public sector thermal plants were handed over to four entities called GenCos (or generation companies). Bulk transmission of electricity was given to an organisation called the National Transmission and Despatch Company (NTDC). Distribution of electricity to consumers became the responsibility of 10 regional distribution companies (DisCos). And the National Electric Power Regulatory Authority (Nepra) was set up to regulate all these entities.
The real test for Wapda’s successor organisations lies in their ability to generate their own money for their operations, Mehmood says. That is what Wapda failed to do, he adds.
He believes the government’s eventual goal is to privatise Wapda and its successor organisations entirely. “But nothing other than Kot Addu power plant has been privatised so far.”
Outgoing Federal Water and Power Secretary, Younus Dagha, agrees that “many steps were taken without a clear road map in mind” while handling Wapda. If privatisation was the goal, he says, it should have been implemented wholeheartedly. “And if privatisation was taking too long then steps should have been taken to strengthen Wapda’s successor departments in the interim.”
Dagha is critical of the way Wapda’s successor entities have been constituted. A real corporate culture will require putting those people in their boards who are financially invested in their operations so that they have pressure to perform, he says. He favours increased private sector participation but wants it to be balanced with public sector investment. “The government will always need to step in for bigger or less profitable projects that have long-term strategic importance.”
This is what the government is attempting under his watch. We are bringing in 29 private sector projects but we are also investing heavily in hundreds of our own initiatives, he says. “This kind of public-private participation works well for everybody.”
Or does it?
If you ever find yourself on the road from Gujranwala to Sialkot, look to your right as you cross the Upper Chenab Canal. You will see three gigantic towers, known as ‘flue-gas stacks’ in industry jargon. Adjacent to these are at least 10 other structures known as cooling towers and no less than 10 mammoth camouflage painted fuel tanks. Together with machines invisible from the outside, they comprise the Nandipur Power Plant — a government sector project always mired in controversy.
The plant is situated on the eastern bank of the canal but water is diverted to go around it, turning the site into a peninsula. A road dotted with several barricaded checkpoints goes inside the plant. A separate entrance from the main Sialkot-Gujranwala road leads into a residential colony, populated primarily by Chinese engineers. Security protocol in place makes the site seem less like a power plant and more like a secret cloning facility.
The power plant shares premises with Nandipur Hydropower Plant — a small run-of-the-canal facility set up in 1963 with an installed capacity of 13.8 megawatts. The site’s proximity to water was a crucial factor in its selection for building the new plant here — thermal power plants need massive amounts of water to keep their machinery cool.
The second factor was Nandipur’s location at the heart of an area that consumes 60 per cent of Pakistan’s electricity — the quadrangle of such industrial hubs as Lahore, Faisalabad, Gujranwala and Sialkot that generates only 3 per cent of Pakistan’s total electricity. Experts have been advocating for a long time that power plants should be built near the area where electricity is consumed. This minimises electricity losses incurred in transmission, they argue, as well as the expense on transmission lines.
Plans for an electricity plant at Nandipur were first devised during Musharraf’s regime. China’s Dongfang Electric Corporation was given the contract to construct it in 2008 at an estimated cost of 23 billion rupees. It was to run on furnace oil and/or diesel.
“Nandipur and Neelum-Jhelum are frequently quoted as examples of power projects gone wrong from conception to execution.”
The project was initially estimated to be completed in 2011 but its handling by the federal law ministry caused a delay of more than two years as expensive machinery procured from General Electric lay abandoned at Karachi port. Dongfang Electric Corporation eventually pulled out of the contract, citing “colossal losses”.
The government, however, convinced it to carry on with construction with added incentives: the firm was to get 80 million US dollars as “remobilisation advance”. (Critics said the concession was illegal as it revised the original contract without inviting fresh bids.)
Soon enough it turned out that the machinery ordered for the plant was of smaller than required capacity. A second round of orders also proved to be miscalculated. A scandal – that adulterated furnace oil was used to run it later – was the last thing the already controversial project could suffer.
Simultaneously, every delay kept pumping up the cost — by 2013, it had more than doubled to 58 billion rupees. In May of that year, Prime Minister Nawaz Sharif inaugurated the plant anyway. It remained operational for an embarrassingly minuscule duration of five days before sputtering to a halt. The electricity it produced during that time cost an astounding 42 rupees per unit. The reason: the plant was made to run on costly diesel oil to facilitate its early inauguration.
Those running the plant went so far as to say that they would not be responsible for any damage to the machinery as a result of hasty inauguration. Punjab Chief Minister Shahbaz Sharif, specifically, received a lot of criticism for what industry insiders perceived as his egoistic interference in the project.
After a tussle with the Federal Water and Power Minister, Khawaja Asif, he had appointed a bureaucrat instead of an engineer as managing director of the plant while it was still incomplete — the arrangement did not last more than a month. Grapevine says the reason for the bureaucrat’s appointment was that he had “made beautiful parks in Lahore”.
Nandipur remains idle at the moment – as it has largely been since its inauspicious inauguration – save for spurts of inefficient activity since July 2015 when the government came up with plans to spend another 30 million US dollars to switch it to liquefied natural gas (LNG).
The objective was to lower the cost of production, improve fuel efficiency and increase electricity generation capacity from 425 megawatts to 525 megawatts.
For the time it was operating, the plant’s production cost was still among the highest in Pakistan. In November 2015, for instance, it generated electricity at 10.25 rupees per unit. Much older plants in private and public sectors were, at the same time, producing electricity at 5 rupees and 8.3 rupees per unit, respectively.
Frustrated, the government first tried to handover the plant’s operations to a Malaysian firm, later to an American one, eventually giving it to a Chinese firm in February 2017. The new operator was allowed to charge the NTDC a tariff 80 per cent higher than what Nepra had originally determined. The tariff the consumers will pay as a result of this steep hike will be 11.64 rupees per unit — that is, if and when the plant becomes operational.
“Nandipur was an ill-conceived project,” says Dagha, not mincing his words. “Nandipur and Neelum-Jhelum are frequently quoted as examples of power projects gone wrong from conception to execution.”
But he sounds optimistic that the switchover to LNG will prove to be an efficient move since other LNG plants in the country are doing great. “Our LNG-powered mega projects of 1,200 megawatts each in Bhikhi (Sheikhupura district), Haveli Bahadur Shah (Jhang district) and Balloki (Kasur district) will be globally comparable for running at 60 per cent plus fuel efficiency (a measure of how much electricity a plant generates in comparison to the amount of fuel it consumes).”
He says the government has been able to save “over 100 billion rupees through close monitoring of the procurement process” for these plants. This will make their electricity cheap for consumers as their production tariff has “come down from the original estimate of 9.5 rupees per unit to 6.5 rupees per unit”.
The recently transferred secretary says the government is also pursuing a policy of shifting to indigenous fuels for power generation, mainly in order to protect electricity consumers from fluctuations in global fuel prices. As of now, private companies are setting up plants with a total capacity of almost 4,000 megawatts that are to run on imported coal.
These are located in Sahiwal (Punjab), Port Qasim (Karachi), Hub and Gwadar (Balochistan). A state-owned plant to run on imported coal is also being set up in Jamshoro with the capacity to generate 1,320 megawatts.
“Other than these projects, all thermal projects in the future will only be set up using local fuel — especially Thar coal,” says Dagha.
The question is how efficient will that be.
In a village in the desert district of Tharparkar in Sindh, a tall woman clad in shalwar kameez was welcoming mainly male guests at the entrance of a temporarily erected tent hall. She would then lead them to seats on a raised platform.
The day was February 17, 1995 and the woman was no other than then prime minister Benazir Bhutto. The occasion was the signing of a memorandum of understanding (MoU) between the government of Pakistan and Consolidated Electric Power Asia of Hong Kong’s business tycoon Gordon Wu.
The MoU was expected to result in the setting up of two electricity generation plants of 316 megawatts each at Keti Bandar in Thatta district. These were initially to be run on imported coal but were to shift to coal mined from Thar desert as soon as it became available.
Khatau Jani, a journalist in Mithi, headquarters of Tharparkar district, was present at the event. In his fifties now and serving as the president of Mithi Press Club, he says Bhutto was so invested in the project that she herself was briefing journalists, ignoring official protocol. About 20 months later, her handpicked president, Farooq Leghari, sacked her government. The new administration in Islamabad, led by Nawaz Sharif, revoked the MoU.
It was in the late 1980s that reserves of about 175 billion tonnes of lignite coal were first reported to exist in Thar over an area of 9,100 square kilometres. Out of these, 27 billon tonnes of coal have been proven to exist since then.
The area where these proven reserves are located is in Islamkot subdivision of Tharparkar district. Sindh government has earmarked 1,000 square kilometres in the subdivision for coal mining, underground coal gasification and power generation. The area has been named Thar Coalfield and has been divided into 12 blocks of various sizes.
Work is at an advanced stage in four of these blocks, according to the website of Thar Coal and Energy Board, a government organisation supervising Thar Coalfield from its headquarters in Karachi. Three companies have been issued mining leases; one of them has achieved financial closure for its project, the website states.
That firm is Sindh Engro Coal Mining Company, a joint venture of Engro PowerGen Limited and the Sindh government with 60 per cent and 40 per cent shares, respectively. The company is also setting up a 660 megawatt electricity generation plant in Thar Coalfield.
Surrounded by books and piles of documents, Jani remains an unsatisfied man. He criticises Pakistan Peoples Party (PPP) for failing to use Thar’s coal reserves for power generation over the last seven years. “Sindh got full control over Thar coal reserves after the adoption of the 18th Amendment [in 2010] but two successive PPP governments in the province have failed to make even a single electricity generation plant operational in Thar,” he says.
On the other hand, Jani says, the party’s handling of social and environmental issues related to coal mining in Thar “has left several question marks on its intentions, integrity and sincerity with people”.
According to a report prepared by Hagler Bailly Pakistan, a consultancy based in Islamabad for Sindh Engro Coal Mining Company, 55,150 people live in 61 villages located in Thar Coalfield; there are nine villages with 7,570 residents in the block where Sindh Engro Coal Mining Company is working.
Local residents complain they have not been compensated for their lost homes and livelihoods in the lone block where mining has started (people living in other blocks are not yet told to leave their villages).
Sitting on a carpet outside Islamkot Press Club, some 350 kilometres south-east of Karachi, is a man in his late twenties. On an afternoon that feels too hot for February, he is writing addresses on envelopes and stuffing them with papers. Every now and then, he stops writing to shake hands with visitors.
The man is Leela Ram Manjiani. He is running a protest campaign against the construction of a reservoir near his village, Gorano, 25 kilometres south of Thar Coalfield, to dispose effluents produced during coal mining. “We are not against development but we want it to be sustainable and beneficial for the indigenous people of Thar,” says Manjiani.
A petition filed by a local resident at the Sindh High Court states the original disposal plan envisaged a pipeline bringing effluents to a reservoir at the village of Dukkur Shah, 10 kilometres from Gorano, for further drainage to marshes of Rann of Kutch on the border between India and Pakistan.
In early 2015, Sindh Engro Coal Mining Company’s officials started a survey near Dukkur Shah. During the survey, they realised that Gorano was a better place for a reservoir. They could acquire 1,500 acres of land there (as opposed to the 600 acres they could acquire in Dukkur Shah) and two tall sand dunes formed a natural depression in the land near Gorano, thus reducing the cost of construction. But, most significantly, a huge reservoir at Gorano could spare the company money that would be spent on drainage of effluents to Rann of Kutch.
In May last year, the company started acquiring land and began building the reservoir without first getting a mandatory Environmental Impact Assessment approved by relevant authorities, the petition states. The provincial authorities had not even issued a statutory notification for acquiring land around Gorano at the time.
It was only after local residents moved the Hyderabad circuit bench of the Sindh High Court on July 1, 2016 against the construction of the reservoir that a land acquisition notification was finally issued on September 13, 2016, says Manjiani.
Zubair Ahmed Abro is appearing pro bono before the Sindh High Court as the lawyer of the petitioners. He says Sindh Engro Coal Mining Company presented an EIA in the court that does not pertain to the reservoir at Gorano but is about the drainage pipeline from Thar Coalfield to Dukkur Shah.
Even later in the proceedings, the company submitted a report by a committee constituted by the Sindh Environment Protection Agency to ascertain whether effluents would be contaminated with heavy metals and whether such contamination would exceed limits set by the National Environment Quality Standards.
But Agha Wasif, secretary of Sindh’s energy department, has no doubt about Gorano being a part of the effluent disposal scheme from the very beginning. “Gorano was always there as a secondary storage or spillover option after the reservoir in Dukkur Shah was to be filled to capacity,” he says. The decision to build a percolation/evaporation reservoir near Gorano, he adds, was taken after the wildlife department said the release of effluents with high total dissolved salts beyond Dukkur Shah could affect Rann of Kutch, which is protected under the Ramsar Convention, an international convention on wetlands.
At least one official document contradicts all this. Minutes of a meeting held on September 16, 2016 at the office of Commissioner Mirpurkhas division state the site at Gorano was discovered after it became known that a Rann of Kutch salt lake, known as Trisingri Dhand – where effluents were to be drained – is part of a protected Ramsar site.
The other reason the minutes cited for preferring Gorano was that the proposed Dukkur Shah pond was found to be of smaller capacity than initially thought. The minutes also disclose that the construction of Gorano reservoir started well before the process of land acquisition for it was completed.
Two other documents raise serious questions about the construction of a percolation/evaporation reservoir or pond in or near Gorano. The first is a bankable feasibility study report prepared by RWE Power International, a German firm that does feasibility studies for power generation projects.
It proposes that effluents should be treated and water, thus obtained, should be used for cooling of electricity generation plants (for which water will be brought from a drain many kilometres away) as well as for other industrial and domestic purposes.
The second document is an environment and social impact assessment report prepared by Hagler Bailly Pakistan. It was this report that became the basis for the granting of a mining lease to Sindh Engro Coal Mining Company.
The report discusses five options for effluent disposal: drainage to Rann of Kutch; drainage to the Left Bank Outfall Drain, which is waterway built by the federal government for drainage from waterlogged lands; creation of evaporation ponds; reinjection into ground; and disposal to salt lakes.
The report discards the first four options — the first can impact wetlands and create transboundary issues with India; the second involves high cost of pumping; the third requires large-scale resettlement of people; the fourth option has possible adverse affects on mining in other Thar Coalfield blocks. Yet, Sindh Engro Coal Mining Company is going ahead with the third option.
Two recent developments have made everything related to Thar coal look even more suspect. On March 24, 2017, the Supreme Court of Pakistan stated that high-level appointments at the Sindh Coal Authority were illegal. The judges stated the authority’s director general, deputy director hydrogeology, inspector of coal mines and prosecuting inspector were all “improperly hired”. About 10 days earlier, the Supreme Court ordered the sacking of the Sindh Environment Protection Agency’s director general, saying he was not qualified for the job.
Time now to look at the private sector.
The Private Power and Infrastructure Board (PPIB) was created in 1994 as a one-window facilitator to promote private participation in the power sector, says Tanveer Alam, a public relations official at the board, as he carefully reads out from his department’s website open in front of him.
The PPIB identifies sites where thermal and hydroelectric projects can be installed; it advertises those projects nationally and internationally to look for investors and opens a competitive bidding process. “When investors approach us, we scrutinise their portfolio,” says Tanveer. “Then we pick the best candidate and issue a letter of intent.”
Following this, the PPIB hands the candidate a ‘to-do’ list — registrations, tariff approvals and power-purchase agreements with the NTDC. Once all this is accomplished, a final contract is signed. Tanveer picks up the phone and punches in an extension. A phone rings somewhere outside and he jots down the details provided to him.
“We currently generate about 9,000 megawatts or 48 per cent of the total electricity in the country through 30 IPPs — 29 of these projects are thermal.” The lone hydroelectric plant under the PPIB remit is located near Mangla Dam and has a production capacity of 84 megawatts, he says.
He claims 29 more power plants – 14 of them hydroelectric, 11 coal-fired, three RLNG-based and one natural gas-based – will be set up by the private sector in the next few years with a combined capacity of 18,922 megawatts. Hydroelectric projects will be based mostly in Azad Jammu and Kashmir and Khyber Pakhtunkhwa, coal-based ones mostly in Sindh and those running on RLNG all in Punjab.
Although hydroelectric projects take much longer and require bigger investment, Tanveer says, return on them is so high that those who can afford the initial investment do not necessarily mind it.
If a single IPP were to take the government to an international court, saying we have defaulted on payment, who will ever give us a loan again?
High return on investment, indeed, is a norm across the electricity industry and partially explains why the IPPs (almost all of them running thermal power plants) tolerate circular debt that hit a 400-billion rupee mark earlier this year.
In spite of their recent newspaper adverts, threatening to cash the state’s sovereign guarantees in case payments due to them are not made urgently, the IPPs will be happy to get the government retire some part of the debt so that they do not face cash flow problems and, consequently, have to stop their operations.
The enigma of circular debt is essentially a yawning gap between the cost of producing electricity and the price paid by consumers, with line losses and electricity theft thrown in for good measure.
Let us consider this simplistic explanation: Pakistan State Oil sells 100 rupees worth of fuel to an IPP (step 1) to generate electricity worth the same amount to sell it to the NTDC (step 2) which, in turn, transmits that electricity to a DisCo (step 3) — by this time, 18 rupees worth of electricity is lost due to bad transmission lines; the DisCo sells the electricity worth 82 rupees to the consumer (step 4) but receives back only 75 rupees due to electricity theft and non-payment of bills.
In each cycle from step 1 to step 4, the system incurs a total loss of 25 rupees that continues accumulating as circular debt.
“It’s the same cycle we follow every time,” says an amused Tanveer. “The IPPs bring the issue to us, we forward it to the water and power ministry which tosses it to the finance ministry. The angrier ones serve the government notices and threaten to initiate legal action but each time they settle [to a compromise].”
He says the government is aware of the consequences of this cycle getting out of hand. “If a single IPP were to take the government to an international court, saying we have defaulted on payment, who will ever give us a loan again?”
Is there a permanent solution to circular debt?
Dagha stresses the need for developing “a more realistic tariff-making mechanism” in order to get rid of circular debt. He says Nepra assumes almost 100 per cent recovery while determining electricity tariff for consumers (making a minor allowance for line losses). This is impractical even in the most developed countries, the secretary points out.
Across the hall from Dagha at the Federal Secretariat sits Khawaja Asif, the water and power minister. He is reading A People’s History of the United States as I walk into his office. “I think the IPPs have been given unnecessary leverage,” he says. “They have recovered their investments years ago [through] high tariffs and fixed capacity charges.”
Asif says some IPPs have been running on fuel efficiency rates as low as 30 per cent and are still not legally obliged to conduct a test known as the heat-rate audit, which is compulsory for public sector power plants. “Yet they complain about how circular debt is affecting them,” he says. Suggesting that these problems will be over soon, he points out that contracts of most of the IPPs are set to expire in the next five or so years.
He, however, rules out the possibility of Pakistan defaulting on its commitment to pay to the IPPs. “The government has never defaulted on its sovereign guarantees and the IPPs will get their payments even though they charge exorbitant interest rates of over 4 per cent [on money the government owes them]. It is highway robbery.”
Each room in Salahuddin Rifai’s house in Rawalpindi is stacked to the roof with files, reports and papers. Before he can begin talking, Rifai must fumble around in the dark to determine why his uninterruptible power supply (UPS) is not working. He presses a few buttons, tugs on a couple of wires and the glaring white tube lights come to life.
Rifai looks overworked — and he says he is. “I was a part of Wapda before its bifurcation, as general manager of the National Power Control Centre in what later became the NTDC,” he says.
After his retirement in 2007, Rifai has worked as senior adviser at Nepra for two years and served the government and international agencies numerous times in advisory capacities. I ask him why the power sector finds itself in the twin binds of circular debt and electricity shortages.
“There was a meteoric growth in electricity consumption by 1985,” he says, almost nostalgically. “The number of households connected to the grid had increased, rural electrification had spread and, most importantly, agricultural and industrial advancements of the 1960s and the 1970s had really increased demand for electricity. This, coupled with lack of money at Wapda, meant there was load-shedding in the peak hours of the summer months.”
The government took a shortcut, seeking to involve the private sector in electricity generation. “It started with a three-page policy,” he says, [but] “it took another three years to sign the first MoU.” Wapda, he adds, “was involved nowhere in it”.
The government invited first bids in 1988 and received numerous offers to build smaller, cheaper plants, including one from a Saudi firm called Xenel, but it ignored all of them, according to Rifai. Jam Yousuf, the then water and power minister, had already earmarked land from his own constituency in Lasbela district, Balochistan, where he proposed – in the words of a World Bank inquiry report – “a monster of a power plant”.
“This was the birth of Hubco,” says Rifai.
Hydroelectric projects had stalled because of a lack of money and the stalemate over Kalabagh Dam.
The government brought all private bidders together and proposed a joint venture to set up a power plant of 1,292-megawatt capacity — unheard of in the private sector anywhere in the developing world at the time. The companies were instructed to arrange money in two and a half years and complete the construction of the plant in 32 months after that.
The government, in the meanwhile, had stopped Wapda from setting up new thermal plants. Nuclear projects built with China’s help would materialise only a couple of decades later. Hydroelectric projects had stalled because of a lack of money and the stalemate over Kalabagh Dam. “Where was the electricity going to come from?” asks Rifai.
The government relied on the private sector to deliver on time. “And it didn’t,” he continues. “The financial closure [for Hubco] took about seven years.”
He also accuses the IPPs of inflating their costs. “At the time, higher efficiency and newer technology plants were being installed in Bangladesh and Egypt for one-third the price.”
Terms and conditions of agreements with the IPPs were not favourable to Pakistan, Rifai says. The government allowed them to retrieve 80 per cent of their investment back in 10 years, he says. They also got guaranteed returns on their investment for the next 30 years, whether they made electricity or not, he adds.
The fixed costs charged by the IPPs have gone up to 18 US dollars per kilowatt of electricity they sell to the NTDC each month, Rifai says. “It is preposterous.”
It was mainly because of those fixed charges that Wapda went into a loss for the first time in its history in 1996, he claims. This burden inevitably spilled over to consumers, making electricity bills soar. Increase in the price of electricity created surprising outcomes: the number of units lost in transmission was the same before and in 1996 but their worth changed from 6.8 billion rupees before that year to 15.6 billion rupees that year, he explains.
Rifai’s argument on tariff sounds plausible but it is not entirely correct. Once the initial 10-year period of guaranteed returns was over, tariffs for most IPPs dropped substantially. Official reports indicate that higher fuel efficiency helped many of them outperform their state-owned counterparts. Most private sector plants now generate electricity at five rupees per unit compared to a GenCo that takes at least eight rupees to produce the same unit.
Rifai reaches for a small vial inside his pocket and takes out a pill that he gulps down with a glass of water. “I used to work 20 hours a day while I was at NPCC,” he says, suddenly looking older than before. “No time for my family, no time for food,” he adds with a laugh. “In that time, though, I stretched our current infrastructure to its limit.”
In more ways than one, that infrastructure is lagging way behind growth in electricity generation. We do not have “the amount of money, infrastructure and expertise required to transmit” the additional electricity, Rifai points out.
He knows of an NTDC plan to improve the transmission system in five years with 600 billion rupees. “But who will give them this money?” When the NTDC goes to Nepra, seeking the inclusion of this money in electricity tariff, he says, it ends up getting just eight or 10 billion rupees for a year.
One wonders what all of this would look like if the entire electricity sector was run by the private sector.
Almas Naeem lives with her small family in a three-room house in the Madina Society neighbourhood of Karachi’s Nazimabad area. She was shocked when, in September 2016, she received an electricity bill of 178,227 rupees.
When she contacted K-Electric (KE), the private company responsible for electricity provision in Karachi, she was told that she has been fined for using an illegal connection alongside her legal one. She rejected the allegation and moved Nepra and federal ombudsman against KE. Her case is pending decision.
In the meanwhile, she has been told by KE to keep paying her monthly bill in accordance with the units consumed until the case is resolved. She has been doing just that but the outstanding amount against her name has increased to over 212,000 rupees over the last six months. She does not know what to do about it.
Sajida’s story is not very different. She lives alone in a two-room apartment in a middle-class locality in Karachi and has been paying 1,000-1,200 rupees as her monthly electricity bill. In January 2015, she received a bill of 60,000 rupees. “I use just a bulb or two, a fan and a refrigerator. I do not even use an air conditioner,” she says.
Sajida is now paying that bill in monthly instalments and has so far paid 20,000 rupees to KE.
The two women are not the only consumers in Karachi to have received extraordinarily high bills. Officials of Jamaat-e-Islami say “over 2,000 people have approached” a cell the party has set up to help electricity consumers in the city in the last few months. When presented them before the federal ombudsman, “70 to 80 per cent of those complainants have been proven right,” says Imran Shahid, who heads the cell.
KE spokesperson Khayyam Siddiqi offers a contrasting picture. “In the past six months, 79 per cent of rulings by the federal ombudsman have been in favour of KE.” He says fines are imposed only when electricity theft or metre tampering is detected and that, too, is done on the basis of regulatory guidelines.
KE includes additional units in the bill for each consumer in an area where electricity theft is high, so as to recover the price of stolen or lost electricity.
Aneel Mumtaz, who worked as an associate engineer with KE until recently, blames the company for another type of ‘excessive’ billing. He says KE includes additional units in the bill for each consumer in an area where electricity theft is high, so as to recover the price of stolen or lost electricity. When KE already recovers those costs through billing then it should not punish individual consumers with excessive bills, he says.
The company is also said to use load-shedding to punish consumers who do not pay their bills. It carries out load-shedding in 39 per cent areas of Karachi under what it calls a segmented load-shed policy. Karachi has been divided into four categories under this policy — low loss, medium loss, high loss and very high loss. The areas in the last two categories, that comprise 30 per cent of the city, remain without electricity between four and a half hours and seven and a half hours a day. Areas in the other categories experience one hour to three hours of load-shedding each day.
“We face three spells of two and a half hours of load-shedding each day,” says Aziz Memon, a resident of Lyari area. He acknowledges that some of his neighbours use illegal connections but “we pay our bills regularly and do not steal electricity so why does the KE punish us for a crime we do not commit?”
Siddiqi says the drive against power theft and illegal connections is aimed at reducing load-shedding, not punishing consumers. The campaign has brought transmission and distribution losses down to 22 per cent in 2016 from 36 per cent in 2009. This has resulted in relieving 61 per cent of Karachi from load-shedding, he adds.
Dagha, too, is one of the critics of KE. In a letter he wrote to Nepra on January 26, 2017, he pointed out that KE had earned an additional profit of roughly 62 billion rupees in the last seven years by not passing on the benefit of quarterly tariff adjustments to the consumers.
Nepra dismissed his allegations, though. It stated the conclusion he had drawn was not only incorrect but based on a sheer misunderstanding of the tariff regime. The regulatory authority said no excess amount was charged from KE consumers since they were being billed according to what it called ‘uniform tariff’.
Yet another issue pertaining to KE is its inability to add substantial amount of electricity to its grid. When it was privatised in 2005, its power generation capacity stood at 1,307.7 megawatts. The company has set up new plants but it has also discarded some old ones. In the process, its generation capacity has improved by a paltry 324 megawatts.
KE also gets 1,184.86 megawatts from external sources — including 650 megawatts from NTDC/Wapda. Together, all the electricity at its disposal amounts to 2,816.17 megawatts. This should be more than sufficient for a city that has a usual electricity demand of 1,900-2,200 megawatts. Even when electricity demand touches its peak during the summers, it does not exceed 2,500 megawatts.
That only means the company is not utilising all the production capacity it has at its disposal. (In December 2016, according to Mumtaz, KE generated electricity from its own plants at an average of only 781.452 megawatts.) Otherwise, there would have been no load-shedding in Karachi at all.
All these issues have remained unaddressed even as KE is in the process of changing its ownership. KES Power Limited, which owns 66.4 per cent shares in the company, is selling its stake to a Chinese firm, Shanghai Electric Power Company Limited. The sale process is awaiting final approvals from the government.
Critics of the deal say KES Power Limited is making billions of rupees out of it, without any benefit to electricity consumers. Chaudhary Mazhar Ali, general secretary of KE Shareholders’ Association, says “KESPL purchased its shares for just 16 billion rupees but it is going to sell them for 180 billion rupees.”
This huge profit, he said in a letter to Nepra, has been attained through unfair means such as bogus bills, government subsidies worth 300 billion rupees and free electricity from NTDC. “I requested Nepra that KE be made to refund all the money received from consumers through illegal means before the change of ownership is permitted.”
Consumers and shareholders are not the only unhappy stakeholders in the electricity sector.
Bakhtiar Labour Hall on Lahore’s Nisbat Road is home to the Wapda workers’ union. On a recent day in February, it is hosting a convention of metre readers from across Pakistan who are agitating against their working conditions.
The building’s reception area is stuffed with people — some engaged in heated debates, others raising slogans about their rights. Bookshelves in the reception are stacked with volumes on labour law and adorning the walls are portraits of an old man, Bashir Ahmed Bakhtiar (who died about a quarter of a century ago). He was the founder of the labour hall and one of the stalwarts of trade union movements in Pakistan.
His son-in-law and successor, Khurshid Ahmed, is known to everyone in Wapda. A self-professed socialist, he has been the unchallenged general secretary of the union since the 1980s. Nestled in a chair against a wall, Ahmed keenly observes the goings-on around him through sharp grey eyes. Some of his closest associates linger around him. A young man standing nearby raises his mobile phone to take a selfie with him. The respect he enjoys is evident.
Ahmed believes Wapda is facing a serious shortage of staff at a time when its workload has exponentially increased. Even in today’s meeting, he points to the reception, workers are complaining that they have to work on Saturdays and Sundays. “They are all highly demotivated; we need more incentives for them so that they do their job better.”
Ahmed reaches into the pocket of his waistcoat and digs out two small photographs. “These are two of our linemen who were electrocuted to death,” he says. “Their relatives handed these photos to me to get them justice. What justice can I give them except to ensure that we try and improve their working conditions?”
According to information gathered by the union, at least 150 linemen lose their lives every year; many more are left disabled. Some of them die in attacks by consumers stealing electricity. “Our men have been killed in [the highly secured and posh] Defence Housing Authority area in Islamabad. So you can well imagine what must be happening to them in the rest of the country.”
Ahmed acknowledges the recent creation of a directorate at Lahore Electric Supply Company (Lesco) as a positive step to provide safety training to workers and to give them safety equipment. That is why there has been no accident in Lahore for the past three months, he says. The nationwide working conditions, though, will not change until all DisCos take similar steps.
One of the key hindrances, Ahmed stresses, is that Wapda’s control lies in the hands of a board of directors that has no stake in it.
Ahmed has a habit of keeping his eyes half-closed when he is in deep conversation. Just when you feel like he may have dozed off, he will counter you with a sharp response. “The resources of this country have been utilised more for luxuries and less to satisfy basic needs,” he responds when asked about flaws in electricity policies.
“Provision of water and cheap electricity are examples of such basic needs in any modern nation. But due to the lack of attention given to this sector, electricity is under-produced and expensive while water has become so scarce that many households, even in bigger cities like Karachi and Islamabad, are forced to buy [it from private] tanker [operators].”
One of the key hindrances, Ahmed stresses, is that Wapda’s control lies in the hands of a board of directors that has no stake in it. The organisation should be run directly by the federal government, he says. He also advocates the creation of a “specialised commission” on electricity that includes “industry experts, workers, engineers and members of Parliament”.
The Paris Agreement signed in April 2016 is considered a historic point in the quest for clean electricity. After the accord, Sweden, for instance, announced its intention of becoming the first country in the world to generate all its electricity through renewable sources by 2040.
Back in Pakistan, any talk of renewable sources remains shrouded in smog. According to the latest Economic Survey of Pakistan, just under 32 per cent of the country’s installed electricity generation capacity is in the form of renewable sources: hydroelectricity 30 per cent; wind, solar and bagasse burning only 2 per cent.
Here are two major examples of renewable electricity generation:
Quaid-e-Azam Solar Park set up in 2015 outside Bahawalpur produces 100 megawatts. The project, being built by Chinese contractors, is expected to have a net installed capacity of 1,000 megawatts someday — out of that 300 megawatts are said to be “near completion”.
If one leaves the Karachi-Hyderabad highway near Nooriabad and turns right towards Jhimpir, one may soon find oneself amid a jungle of windmills on both sides of the road: 13 companies are producing 650 megawatts of electricity from wind here and elsewhere in Sindh.
By the end of 2017, according to a senior official in Karachi, this will go up to 1,000 megawatts. Seven years ago, windmills produced only 50 megawatts, he says.
Another 82 megawatts of alternative energy comes from the burning of sugarcane residue, also known as bagasse.
Zoom out to a global scale and Pakistan’s renewable energy figures are not particularly unimpressive — United States produces 11 per cent of its electricity from renewable sources, China 23 per cent and India 28 per cent.
What makes these statistics worrying is that Pakistan’s electricity mix has been inverted in the past two decades — from an approximate 70:30 ratio in favour of hydroelectricity to the current 30:70 ratio in favour of non-hydroelectric sources.
Rafay Alam, one of a handful of environmental lawyers in the country, offers an explanation. “Warning bells went off in the Musharraf era with the realisation that we will have to wait another 10 or 15 years for more hydroelectric power,” he says sitting in a veranda of his house in Lahore. “In that panic, we relied on quick fixes like rental plants and inefficient second-hand machinery the Chinese are offloading because they are switching to renewable sources.”
“Once the system becomes digital, stealing electricity will become impossible.”
He feels the government should have, instead, used the situation as a window of opportunity to invest in renewable sources. “There are examples of renewable sources doing amazing things across the world. We can benefit from them if only we pay attention.”
He cites the example of a tariff policy adopted in Germany. “A country which has four or five months of no sun has introduced a system where private individuals can sell their excess electricity to the grid. This has created a financial incentive for homeowners to put up solar panels on their rooftops and for companies to lease unused rooftops for the same purpose. This added 13,000 megawatts of solar electricity to the grid between 2008 and 2013.”
A Yale World Fellow, Rafay has also worked as Lesco’s chairperson between 2011 and 2013. He was removed from his position over policy differences. “I can safely say that 23 per cent of electricity is stolen in Lahore.” A megawatt saved is cheaper than a megawatt generated, he argues, but nowhere in our energy sector is the use of electricity planned.
There is a steady beeping in the background as he talks. “That sound, incidentally, is coming from my solar unit,” he says, pointing a finger towards the roof. As technology is improving, prices are coming down, he adds. “Four years ago, you could purchase a three kilovolt-ampere system for about 800,000 rupees and run pretty much everything in your house except for the air conditioner. Today, you can get a five kilovolt-ampere system for 300,000 rupees and operate an air conditioner or you can buy a 12 kilovolt ampere-system and operate the whole house.”
He suggests that Lesco can rent out solar systems to individual consumers, inserting in them a chip that the company can control. “If Lesco does not receive the rent, it can switch them off.”
“Think of it this way,” he explains. “The highest demand for electricity comes from our cities and suburban areas. Most of this demand is by rich homeowners. Consumers in rural and lower-income urban areas do not need thousands of megawatts.” They can be provided electricity through renewable sources producing small amounts of electricity, he says.
Younus Dagha gets excited as he talks about the future. “I am highly optimistic about the possibilities of solar energy,” he says. “It has shifted drastically from being an unaffordable alternative to a viable one, competing in price with even thermal plants.”
Under his watch, solar tariff has dropped from 17 rupees a unit to 5.2 rupees a unit in Pakistan. Wind energy tariff has also decreased from 15 rupees a unit to 6.75 rupees a unit in the same period and that of LNG from 9.5 rupees a unit to 6.3 rupees a unit. (Tariffs may well have dropped because they no longer need to include high initial investments.)
But, like many others in the water and power ministry, the secretary is of the opinion that Pakistan should wait to benefit from the steady drop in global prices of alternative technologies — that is one reason why work on the 700 megawatts at Quaid-e-Azam Solar Park is being delayed. He is hopeful of going “for alternatives in a big way” once Pakistan has overcome its existing energy shortage, which he believes will happen next year.
Once there is surplus electricity, his boss Khawaja Asif vows that a merit order will be established — the NTDC will buy electricity from the cheapest source first and from the most expensive last. “Let them compete,” he says with a raised eyebrow. “Let them invest in machines that produce 61 per cent fuel efficiency.”
In his opinion, private investors have had an entirely risk-free investment which is not a good model for efficiency. “There needs to be some challenge posed for an investor to improve.”
Asif was a petitioner against rental power plants — a 2008 scheme under which five-year contracts were awarded to private companies to bring rented power plants into Pakistan to overcome the yawning electricity deficit quickly. The process was reported to be so riddled with corruption that even the prime minister at the time, Raja Pervez Ashraf, is facing accountability references involving corruption of 22 billion rupees.
Just like the government has inherited a corrupt-to-the-core officialdom of the power sector, Asif says, there have been other holdouts from the past that he had to tackle. “We get a lot of criticism for projects like Nandipur and Neelum-Jhelum but these are problems we inherited,” he says. “We know the problems associated with these projects but we cannot abandon them after all the time and money spent.”
He is aware that there is a lot to fix in the electricity sector and that he, or his ministry, alone cannot fix all of it. “A whole lot of ministries, like water and power, finance and planning commission, have to work together like one unit to do a comprehensive analysis of what our energy requirements are, what they will be, and what we need to do in order to meet them.”
Asif is particularly enthused by the technologies being incorporated into the sector. “We have started metre reading with mobile phones,” he says. “You must have seen there is a photograph of the metre in the bill. We are also looking to introduce smart metering, first at the grid and feeder level and then at the consumer level.”
The “smart-metres” are intended to automate the entire electricity system — from beginning to end. Electricity distribution companies in Islamabad and Lahore have started working on the idea and it has attracted the attention of World Bank and Asian Development Bank. “Once the system becomes digital, stealing electricity will become impossible.”
But it requires massive amounts of money and at least 10 to 12 years to weave the new metres into the system — that is, in a best-case scenario.
As I get up to leave his office, my eye is caught by three panels on a wall. Painted on them are names of every minister of water and power since the 1970s — from Hayat Sherpao to the incumbent. Each has announced grand plans; most have not delivered.
This story was originally published in the Herald's April 2017 issue. To read more subscribe to the Herald in print.
The writer is a staffer at the Herald. Additional reporting by Maqbool Ahmed, Moosa Kaleem and Saleem Shahid