Among the many causes for scepticism with regards to the energy deals being struck with China, as a part of the China Pakistan Economic Corridor (CPEC), power affordability is a major concern. With the government incorporating wind and solar power projects, including the much touted Quaid-e-Azam Solar Park in Bahawalpur, the cost of power production is bound to increase. This in turn would burden both the domestic consumers and the local industries.
“The upside tariffs being offered on all deals with China are higher than what we currently have,” says financial journalist and columnist for the daily Dawn Khurram Hussain. “Assuming that all projects go smoothly – and that’s a big if – the immediate impact will be an increase in the power tariff in the next 10 years.”
“While the Quaid-e-Azam Solar Park might help bridge the power shortfall somewhat, the affordability will be impacted,” says PEPCO MD Tahir Basharat Cheema. “As per new deals, wind power is being generated at 16.50 cents per unit and solar power will come at 17.38 cents,” he claims. “The only way someone will put their money in the investment portfolio is if they see profitability. This means that unless we eradicate circular debt and create the ability to pay for the power generated, the projects will be jeopardised,” he says. “The CPEC has given us an opportunity to right our wrongs. If we’re not careful we might end up with agreements like the ones we signed up for in the aftermath of the National Power Policy in 1994.”
Considering that 20 textile mills have already closed down recently due to exchange appreciation, with 100 more believed to be vulnerable to power viability issues, will the industry survive a potential hike in power price?
“No,” says APTMA Chairman SM Tanveer.
“We’re already closing down. The cost is increasing. We haven’t received any benefits of EU’s GSP Plus status. We haven’t received any tax refunds either,” he adds. “Our issue is affordability and availability. India and China have power available at around 8 cents per unit. For us it’s 13 cents. The government’s FAS (Fuel adjustment surcharge), that reduced the price by 3-4 cents, is temporary, since it coincided with the global oil price drop.”
He adds, “Sindh is getting electricity at around 6 cents; KPK at 7 cents. There is 24-hour gas availability in those provinces. The difference between Punjab and Sindh, or Punjab and India/China, is more than Rs 100 billion. This has increased our business cost and resulted in the industry being shut down.”
Article 158 (b) of the 18th Amendment to the Constitution gives Sindh and KPK the control over the provincial gas production, which according to Tanveer has exacerbated Punjab’s energy crisis.
“Our stance is that since there’s a countrywide energy crisis, we should divide the imported LNG across all provinces. Punjab’s gas availability is around 33% as things stand.”
The APTMA chairman claims that by solving the textile industry’s gas issues, the government can actually boost the national power grid.
“Punjab’s textile industry consumption is 1,500MW. If we’re getting 33% gas, that means there’s 1,000MW captive power that’s closed down. If the government gives us that 1,000MW, that means $1,000 million worth of expense,” he says. “Adding 20% equity, there’s $200 million that the government will have to put in. We’re already making do with 33%, if we get 100% gas at weighted average, the power that we’re currently consuming will then be divided in the country. Without any investment, the government will boost the national power grid.”
Cheema proposes a 5-point agenda. “First, we need to create the ability to power purchase ability. This means curbing power theft and non-payment of bills, which in turn is dependent on enhancing government’s writ,” he says. “Second, from meter-readers to chairmen all appointments are political. That needs to change. Third, we need 100% professionalism. Fourth, projects should be approached with affordability in mind, not for photo-ops. Finally, energy efficiency needs to be improved and demand should be controlled.”
Cheema also stresses the importance of energy conservation. But the supply needs to be significantly increased regardless, while ensuring affordability. How does the government ensure that?
“In all probability, local coal is the answer,” Cheema believes, adding that, “Thar coal should be the focus of our national policies. Secondly, all our power stations should be constructed on the coastline, so that we decrease logistical costs. This doesn’t mean that we shouldn’t generate wind or solar power, but that should be the icing on the cake.”
Hussain claims that power generated through Thar coal, which is lignite and not coal per se, would need much better infrastructure.
“The private investor will not build the transmission line,” he says. “The quantity of electricity being transferred would require a very high tension line all the way to Jamshoro and then there is the upgradation of the existing transmission grid as well that needs to be taken care of.”
“The upside tariffs being offered on all deals with China are higher than what we currently have,” says financial journalist and columnist for the daily Dawn Khurram Hussain. “Assuming that all projects go smoothly – and that’s a big if – the immediate impact will be an increase in the power tariff in the next 10 years.”
“While the Quaid-e-Azam Solar Park might help bridge the power shortfall somewhat, the affordability will be impacted,” says PEPCO MD Tahir Basharat Cheema. “As per new deals, wind power is being generated at 16.50 cents per unit and solar power will come at 17.38 cents,” he claims. “The only way someone will put their money in the investment portfolio is if they see profitability. This means that unless we eradicate circular debt and create the ability to pay for the power generated, the projects will be jeopardised,” he says. “The CPEC has given us an opportunity to right our wrongs. If we’re not careful we might end up with agreements like the ones we signed up for in the aftermath of the National Power Policy in 1994.”
Considering that 20 textile mills have already closed down recently due to exchange appreciation, with 100 more believed to be vulnerable to power viability issues, will the industry survive a potential hike in power price?
“No,” says APTMA Chairman SM Tanveer.
“We’re already closing down. The cost is increasing. We haven’t received any benefits of EU’s GSP Plus status. We haven’t received any tax refunds either,” he adds. “Our issue is affordability and availability. India and China have power available at around 8 cents per unit. For us it’s 13 cents. The government’s FAS (Fuel adjustment surcharge), that reduced the price by 3-4 cents, is temporary, since it coincided with the global oil price drop.”
"In all probability, local coal is the answer"
He adds, “Sindh is getting electricity at around 6 cents; KPK at 7 cents. There is 24-hour gas availability in those provinces. The difference between Punjab and Sindh, or Punjab and India/China, is more than Rs 100 billion. This has increased our business cost and resulted in the industry being shut down.”
Article 158 (b) of the 18th Amendment to the Constitution gives Sindh and KPK the control over the provincial gas production, which according to Tanveer has exacerbated Punjab’s energy crisis.
“Our stance is that since there’s a countrywide energy crisis, we should divide the imported LNG across all provinces. Punjab’s gas availability is around 33% as things stand.”
The APTMA chairman claims that by solving the textile industry’s gas issues, the government can actually boost the national power grid.
“Punjab’s textile industry consumption is 1,500MW. If we’re getting 33% gas, that means there’s 1,000MW captive power that’s closed down. If the government gives us that 1,000MW, that means $1,000 million worth of expense,” he says. “Adding 20% equity, there’s $200 million that the government will have to put in. We’re already making do with 33%, if we get 100% gas at weighted average, the power that we’re currently consuming will then be divided in the country. Without any investment, the government will boost the national power grid.”
Cheema proposes a 5-point agenda. “First, we need to create the ability to power purchase ability. This means curbing power theft and non-payment of bills, which in turn is dependent on enhancing government’s writ,” he says. “Second, from meter-readers to chairmen all appointments are political. That needs to change. Third, we need 100% professionalism. Fourth, projects should be approached with affordability in mind, not for photo-ops. Finally, energy efficiency needs to be improved and demand should be controlled.”
Cheema also stresses the importance of energy conservation. But the supply needs to be significantly increased regardless, while ensuring affordability. How does the government ensure that?
“In all probability, local coal is the answer,” Cheema believes, adding that, “Thar coal should be the focus of our national policies. Secondly, all our power stations should be constructed on the coastline, so that we decrease logistical costs. This doesn’t mean that we shouldn’t generate wind or solar power, but that should be the icing on the cake.”
Hussain claims that power generated through Thar coal, which is lignite and not coal per se, would need much better infrastructure.
“The private investor will not build the transmission line,” he says. “The quantity of electricity being transferred would require a very high tension line all the way to Jamshoro and then there is the upgradation of the existing transmission grid as well that needs to be taken care of.”