Economy
 
Power cuts affecting the industrial production
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Visits 1654
    
April 27, 2012
Shortage of electricity is the core of economic, industrial, agricultural problems the country is facing today. The country has alternate energy resources such as power, gas and coal. At first most of the energy was gained from hydel power but now other energy means such as gas is also being used to meet the growing energy needs. But with the increase in population the energy crisis is continuing to grow.

The persistent shortage of electricity in the country has adversely affected the

national economy.

Industrial production has been severely hit; and also triggered social unrest which sometimes turns violent thus, creating law and order problems in many urban centres in the country. According to one estimate power shortages have resulted in an annual loss of about 2 percent of GDP Another recent study reports total industrial output loss in the range of 12 percent to 37 percent due to power outages.

According to Pakistan Institute of Development Economic Report “ Power Crisis in Pakistan: A crisis in Governance” another important issue that had a negative impact on the electricity supply chain was the lack of timely and essential maintenance of the existing plants specifically in the public sector.

The total installed power generation capacity of Pakistan in 2010-11 was 23412

MW. Out of this, 16070 MW was thermal (69 percent), 6555 MW was hydroelectric (28

percent) and 787 MW was nuclear (3 percent). Since 2007-08, the growth in the installed

capacity is at the rate of almost 5 percent (compared to 2 percent growth between 2001

and 2007). The addition in installed capacity in the last four years (2007-08 to 2010-11)

is not only because of captive power plants and rental power plants (encouraged by the

present regime) but also by IPPs which were commissioned in the previous regime

(Table 1). The rental installed capacity which was 336MW in 2008-09 had gone down to

172 MW 2009-10, but recovered again in 2010-11, the report says.

Although installed capacity increased in this year but power generation declined substantially. The shortage of gas, less water release from Indus River System Authority (IRSA) and annual maintenance shutdown of thermal and nuclear power station were the main reasons behind it.

According to the report, overall although installed capacity and generation have shown a positive growth in the last few years, however, the actual addition in the installed capacity, as well as in power generation, has always remained short of the targeted level (as per the Annual Plans).7 Thus, indicating the lack of effectiveness of project planning and implementation during the last few years.

The electricity sector has been seriously affected by the inter-corporate debt. Besides creating budgetary problems , this has badly affected the power sector.

Such debt is created when the power generation companies under PEPCO and KESC

fail to clear their dues to fuel supplier. The fuel suppliers in turn default on their payment commitments towards refineries and international fuel suppliers. Similarly, the IPPs, because of the delay in the payment from the Government11 could not make payment to the fuel suppliers, so they have to produce below their capacity. The failure of PEPCO and KESC in clearing their dues towards fuel suppliers and IPPs is due to their (DISCOs) inefficiency in the collection of revenues, transmission and distribution losses and below cost power, the report points out. Since its inception the amount of circular debt has kept on fluctuating from Rs 100 billion to more than Rs 400 billion owing to reduction in recovery and failing to receive fines from power thieves, according to the report.

Till April-2011 the net circular debt was Rs 258.5 billion; compared to Rs 103.9 billion in April 2009 indicating an increase of almo st 147 percent. Receivables amounted to Rs 775.2 billion and payables stood at Rs 516.7 billion12 [Pakistan (2011)]. Only 86.5 percent recovery was made in fiscal year 2010-11 as compared to 104.3 percent recovery in 2009-10.

According to the report the distribution companies (DISCOs) have failed to control their inefficiencies. Except for IESCO, LESCO, GEPCO, and FESCO; the rest of DISCOs (with a combined 30 percent consumption of the total) have extremely high losses.

The major part of these losses is due to theft in these DISCOs.

No progress has been made to minimise power theft or to overcome technical constraints—such as overloading of transformers and limited capacity of transmission lines to transfer power to consumers efficiently. Companies with high system losses also suffer from low recoveries (60 to 70 percent of the billed amount); whereas the recovery in the case of IESCO, LESCO, GEPCO and FESCO is about 98 to 99 percent. These inefficiencies in the distribution companies have not only affected their financial position but leads to an additional unjustified cost to those consumers who are paying their bills regularly or to the Government in the form of tariff differential subsidy.


International Monetary Fund in its report on Pakistan while expressing fears of economic slowdown, increase in government expenditure, lagging behind in health and education sectors from neighboring country and increase in unemployment also has indicated that Pakistan’s economy is suffering due to load shedding in the country and by ending subsidy on electricity the problems could be minimized.

Monetary agencies like IMF often use tough language which does not sit well with the political and public circles. Often the suggestions given by such organizations become a source of burden on the common man. The real purpose behind the use of tough language by these organizations is to help the concerned countries to improve their economy.

When any country is spending more money for one unit of production of electricity and receiving less amount from consumers than its simple that loss must be tolerated in electricity sector. This deficit is overcome by the government. Usually the elected governments are cognizance of the public problems and tend to strike a balance between problems of the people and country’s economy.

The government although had rejected the IMF reports and termed it as misleading but we cannot turn away from the reality that load shedding has affected every sector of this country. Due to this a large section of the public is suffering from inflation and unemployment. The gas crisis has further multiplied the problems. Due to the gas crisis the power houses and factories are adversely affected. The rates of transport have increased and the housewives face much problems in lightening the stove. The riots of the public against power and gas outages are creating a law and order situation, traffic is disturbed.

There is an encouraging sign that the present government is making efforts to get gas from Turkmenistan, Iran, Qatar and Russia to meet the energy needs of the country and is also paying attention to projects of getting electricity and gas from Thar Coal reserves to meet the needs of the energy sector.

Judging by the efforts it seems that the present government by the end of their tenure would be able to make a base, making it easier for the coming governments to deal with the power and gas crisis. If we start working on projects utilizing our natural resources to get cheap electricity from alternate resources than there would be no load shedding and neither our economy would have to face irreparable loss.

The looming energy crisis prompted PM Gilani to summon energy conference in which

Many key decisions were made.

At a time when the country is facing the worst form of power crisis the consensus on solving this issue is an encouraging sign. Uniform load shedding in all four provinces will help put an end to complaints of favoritism towards a single province or city. Although the power outages have affected the industries of the entire country, but Punjab had the most complaints as its industries in Faisalabad, Lahore, Sheikhupura, Sialkot, Gujranwala and Gujrat have been affected.

One important decision taken during the energy conference was to close down markets and business centers by 8 pm. This exercise is practiced almost everywhere in the world. In Europe the markets are closed by early evening and no concept of night shopping exists. Whereas in our country the markets remain open till midnight which raise the usage of electricity by many folds as the shops use many lights to make their shops more attractive. Our country, which is already cash strapped cannot afford this luxury and all efforts at government as well as individual levels needs to be made to conserve electricity.


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