Reasons of Increasing Electricity rates in Pakistan A Review of the Literature

Majid Ali Communication Skill [Research Paper] Section C, ID # 091320079 Ms. Anjum Naseem Rao Centre of English language May 20, 2011

School of Science and Technology University of Management and Technology C - 2, Johar Town, Lahore 54700

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Increasing electricity rates in Pakistan By: Mirza Majid Ali

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Abstract

In this Research Paper the purpose of study was able to know Reasons of Increasing Electricity rates and also energy crisis in Pakistan and define Recommendations &Solutions of this problem. Electricity rates keeps on increasing in Pakistan all the time. Pakistan is facing a huge energy crisis and the demand of electricity is increasing on daily basis. The electricity shortfall has hit the record level of 7,075 MW and its not going to be resolved in the near future. This energy crisis is basically due to the inefficient policies of government. The rate of inflation is also increasing in country, and it has made the life of common people very difficult. Now due to the shortage of electricity and increase inflation the electricity rates in Pakistan also keeps on varying on the daily basis. The increase in electricity tariffs is now becoming daily headline of news papers. There are several factors that are affecting this rise in tariffs, but we are just going to highlight the few basic aspects. It is difficult to found the information. Some time I struck while making research paper due to lack of information. There is time constrains as well any how all the contents are fulfill according to the outline and concluded as well.

Increasing electricity rates in Pakistan By: Mirza Majid Ali

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Acknowledgement

In the name of ALLAH most merciful and beneficent

I am gratified to Almighty God who is our creator and his Prophet Muhammad (PBUH) for showing blessing on me to develop this research paper. And his blessing that has brightened every part of my lives. I am thankful to my teacher Ms. Anjum Naseem Rao for excellent conducting the course of communication skill and for enabling me to complete this research paper which enhanced my communication skill and also management skills. I am also thankful to Ms. Anjum Naseem Rao who assigned me this topic and resolves my issues regarding my research paper and guided in making that research paper. I state my modest thanks to my parents whose prayers today able me to complete the research paper. I would like to thanks all those people who help me in making this research paper. I also state my gratitude teacher Ms. Anjum Naseem Rao this is their effort, guidelines that today I have completed the research paper successfully.

Increasing electricity rates in Pakistan By: Mirza Majid Ali

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Increasing Electricity rates in Pakistan

Research Question:

Why are electricity rates increasing in Pakistan? How to solve the energy crisis in Pakistan? How can we reduce electricity rates in Pakistan? What are Basic reasons behind the increase electricity rates in Pakistan?

Thesis statement:
Electricity rates in Pakistan are increasing due to Inefficient government policies, electricity shortage, dependence on furnace oil and lack of use of alternate sources. Increasing electricity rates in Pakistan By: Mirza Majid Ali

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Introduction:
Energy is considered to be life line of any economy and most vital instrument of socioeconomic development of a country. Energy is pivotal in running machinery in factories and industrial units, for lighting our cities and powering our vehicles etc. there has been an enormous increase in the demand of energy as a result of industrial development and population growth, in comparison to enhancement in energy production. Supply of energy is, therefore, far less than the actual demand, resultantly crisis has emerged. An energy crisis can be defined as any great bottleneck (or price rise) in the supply of energy resources to an economy. Pakistans energy infrastructure is not well developed, rather it is considered to be underdeveloped and poorly managed. Currently the country is facing severe energy crisis. Despite of strong economic growth and rising energy demand during past decade, no serious efforts have been made to install new capacity of generation. Moreover, rapid demand growth, transmission losses due to outdated infrastructure, power theft, and seasonal reductions in the availability of hydropower have worsened the situation. Consequently, the demand exceeds supply and hence load-shedding is a common phenomenon through power shutdown. By energy crisis Electricity rates keeps on increasing in Pakistan all the time. Pakistan is facing huge energy crisis and the demand of electricity is increasing on daily basis. The electricity shortfall has hit the record level of 7,075 MW and its not looking to be resolved in near future. This energy crisis is basically due to the inefficient policies of governments rate of inflation is also increasing in country, and it has made the life of common people much difficult. Today Pakistan is facing huge electric power crisis. By looking at current scenario, it appears to be impossible to overcome this crisis in the upcoming future. To get to the solution to this issue proper understanding and correct implementation is needed. At present Pakistan is among the list of countries where per unit cost of Electricity is very high. Electricity rates are always on the move in Pakistan, adding more to the difficulties of the lower and middle class. The main reason is the lack of proper funding to the electricity regulatory authorities, the increasing inflation and poor government policies. Also the ongoing electricity shortage and increase in electricity demand effects the electricity tariffs to a great extend.

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A Review of the Literature Basic reasons behind the increase electricity rates in pakistan:
Following is the list of few basic reasons behind the increase in electricity tariffs. 1. Background Increase in electricity rates over the past years Problems faced in controlling electricity rates in past 2. The Lack of government attention Substandard government policies Lack of future planning The internal corruption between dealing authorities 3. The Increment in rate of inflation Increasing poverty in country powerlessness of common people to pay electricity bills 4. The short fall of electricity Shortage of electricity and increase in demand Increase in per unit cost due to electricity shortage Misuses of electricity by customers 5. Dependence on oil Use of oil furnaces for producing electricity Varying rates of oil in international market Increase in rates of electricity due to varying oil prices Lack of usage of alternate sources for electricity production

6. Lack of latest technology Old billing system and Inclusive Taxes Line losses due to poor transmission system Lack of funding and latest technology to the dealing Authorities

Lack of Government attention:

Increasing electricity rates in Pakistan By: Mirza Majid Ali

UMT 8 Electricity rates in Pakistan Role of government is very important in the success of any country. The government will have to fulfill its responsibilities and have to work sincerely for the betterment of the country. But unfortunately its not the case with Pakistani government. Inefficient government policies The Pakistani government had to renew its current policies about energy crisis. So far government is totally failed in controlling this ongoing energy crisis, the government had not done much to tackle this shortfall of electricity. New dams should be built; different sources of producing electricity should be used. Electricity rates are increasing in Pakistan on daily basis. This is mainly due poor government policies to control electricity rates. So far government has not taken reliable steps to control electricity rates. (Nepra Pakistan, 2009) Government prefers to use rental power plants and has done nothing for searching alternate sources. Pakistan has large coal reserves but they have not been used much. Only 150 MW of electricity is being produced from coal. (News, 2010) This whole crisis is due to the insufficient government policies and planning. It would not be fair to criticize current government only but the previous governments should also be blamed for the current crisis. Really, the previous governments had done nothing. They not even planed about handling the increasing electricity demand. But now it is responsibility of current government to deal with this job. There is no use of just blaming what others have done so far. (Sifat Shah M. L., 2009) Lack of future planning The other reason for this ongoing energy crisis is lack of future planning. The government has totally failed to forecast and plan for future. With the increasing demand of electricity, government should have planned to overcome the energy crisis in future. Previous governments have done nothing, they just talked about building new dams but no one was able to give it practical picture. In the past, a very few power plants were built. Also, the demand is increasing rapidly, and is going to increase more in future. Government has done nothing for searching alternate sources for producing electricity. Pakistan has large coal reserves but they have not been used much. So far Government has not taken reliable steps to look for alternate sources to produce electricity. (Sifat Shah A. R., April 2010) This directly affects the electricity rates; the government is increasing the electricity prices on daily basis. Due to governments inability to increase the current electricity Production and the rapidly increasing demand, government has no choice but to increase the electricity prices. With this increasing demand the government is also increasing Increasing electricity rates in Pakistan By: Mirza Majid Ali

UMT 9 Electricity rates in Pakistan taxes on per unit cost of electricity. Government has no plans to control these increasing electricity prices. (Chaudhry, April, 2010) The Government had to plan for installing new energy generation plants, and find alternate energy plans for providing electricity to common people at accessible rates. Corruption and Lack of funding One of the main hurdles that government has to face is corruption, the government authorities must work sincerely and purely. There must be some check and balance to these regulating authorities. The government has taken few quick steps regarding electricity shortage, but instead of helping the common peoples they are adding more to their difficulties. Imran Khan the leader of Tehreke-insaf Pakistan says in one of his recent interviews on his Forum (www.insaf.pk/Forum.); We the simple people of Pakistan expect that our dumb and uneducated politicians are capable of solving our Electricity problem. To be very honest, our dumb politicians are coming out with all the wrong and totally absurd, laughable solutions like having two holidays and shutting down shops at 8 oclock. Due to this corrupt electricity regulating authorities the short fall of electricity had not been overcome, causing the demand of electricity to increase. Due to this increase in demand, the rates of electricity have been affected consistently. There should be proper check and balance on these authorities by government to avoid misuses of electricity. (Sifat Shah M. L., 2009)

Dependence on oil:
Pakistan is producing about 60 % of its electricity from oil and gas, by thermal power plants and from oil furnaces. This greatly affects the electricity per unit cost. Electricity produced through oil is more expensive as compared to other sources.

Increasing electricity rates in Pakistan By: Mirza Majid Ali

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Use of oil furnaces Pakistan is producing most of its electricity by oil. Due to this dependence on oil furnaces Pakistan is producing expensive electricity. Out of 19,000 MW installed capacity of electricity generation in Pakistan 12,000 MW is produced through oil and gas. So due to this excessive use of oil furnaces, the electricity produced is more expensive. As oil prices in the international market keeps on changing so the cost of electricity production increases, this is directly related to the electricity rates in Pakistan. Pakistan is not a natural producer of oil so Pakistan has to import oil from abroad which is expensive. So electricity produced with this imported oil is also much more expensive. (Pesnani, 2010) Varying oil prices Oil prices keep on varying in international market. These varying oil prices have strong impact on economic stability of country. Being an importer of oil Pakistan had to suffer from the ups and downs of international market. The prices of oil also affect the electricity rates, and it will become more and more expensive as time passes. Pakistan is highly dependent on oil, which means that any variation will have a definite impact on its economy, and specially electricity. If we see today oil prices are increasing in international market, it directly affects the electricity rates in Pakistan. (News, 2010) Following is the rate of increase of oil prices in international market.

Increasing electricity rates in Pakistan By: Mirza Majid Ali

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(Chaudhry, April, 2010)

Lack of usage of alternate sources Another point to look at is lack of usage of alternate sources. Pakistan is mostly dependent on oil and water for electricity production. As discussed above electricity produced by oil is more expensive. So, one reason of producing expensive electricity is lack of alternate sources. Pakistan is a blessed country; Pakistan has large coal reserves but unfortunately so far very little of electricity is produced by coal. Pakistan also had great potential for solar and wind for electricity generation, but like other sources they are also not used as much. (Chaudhry, April, 2010)

Lack of latest technology:

Technology is growing very fast in the world now days. So in order to catch up with the world, the country must have to keep pace with this growing technology. In Pakistan the technology is growing but it is still not to the advanced level. One reason of increasing electricity rates is use of aged technology and lack of new technology. (Bug, 2007) Line losses A considerable amount of energy is lost due to line losses in transmission system. This is due to the poor quality of transmission lines and their poor maintenance. In this present energy crisis the importance of wastage of electricity through these losses cannot be ignored. One of the most basic problems that WAPDA is facing is unnecessary loss of energy due to its poor power system. According to a recent survey about 30.2 % of energy is lost due to technical and non technical losses. (Bug, 2007) (Pakistan, 2009) A considerable amount of energy is lost due to the aged and poor transmission line. Apart from the gap between demand and supply the poor maintenance and line losses are also the factors affecting the current crisis. According to a survey one percent line loses cost Rs 1 billion to the national exchequer. Due to this wastage of electricity in form of line losses the gap between demand and supply is increasing which affects the electricity rates. (WAPDA, 2011) WAPDAs losses are also added by the low quality of equipment used by consumers. Use of cheap quality of motors and other equipments are also reasons of losses. Increasing electricity rates in Pakistan By: Mirza Majid Ali

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Province-wise losses transmission losses (percentage) Province Balochistan N.W.F.P Punjab Sindh 2006-07 21.4% 13.2% 13.6% 36.9% 2007-08 0.8% 34.5% 13.2% 35.9% 2008-09 20.1% 35.3% 13.1% 34.7%

Lack of technology Pakistan is a blessed country, Pakistan has large coal reserves, water reserves, has potential for solar and wind power generation. But lacks in technology, Pakistan does not have latest technology to completely exploit the potential in the country. This causes Pakistan to stick to the expensive ways of producing electricity and lack of usage of alternate sources. So Pakistan has to relay on water and oil mainly for electricity production. Production through oil is much more expensive, which results in expensive electricity. Another factor which comes in lack of technology to reduce or overcome the energy losses. This includes technical losses during production and transmission of electricity. Due to this inability to reduce losses, a considerable amount of energy is lost, resulting in shortage of electricity supply. (Bug, 2007) (Pakistan, 2009) Electricity Theft There is no proper mechanism to control electricity theft. A considerable amount of electricity is lost due to electricity theft. Electricity theft is basically due to lack of responsibility from the part of customers. Peoples often steel electricity from main transmission lines; Government has done nothing to control electricity theft so far and is just dependent on the part of customers. (Pakistan, 2009) During this present energy crisis energy lost in this manner cannot be accepted. On the other hand poor Peoples have no choice, but to steel electricity to fulfill their needs. According to a recent survey the percentage of electricity theft is Increasing electricity rates in Pakistan By: Mirza Majid Ali

UMT 13 Electricity rates in Pakistan greater in poor provinces as compared to Punjab the percentage is higher in other provinces. The main reason of this high percentage is expensive electricity. Peoples have not been able to afford electricity at such high rates. (Bug, 2007)

Data analysis and statics:

Pakistans Energy Sector:

Electricity produced in Pakistan is from three main sources. 1).Hydro 2).Thermal (Gas/Steam/Furnace Oil) 3).Nuclear There are four major power producers in country which include Water & Power Development Authority (WAPDA), Karachi Electric Supply Corporation (KESC), Independent Power Producers (IPPs) and Pakistan Atomic Energy Commission (PAEC). Below is the break-up of the installed capacity of each of these power producers (As of June-2008). WAPDA's Total Hydro+ Thermal capacity is 11272 MW Karachi Electric Supply Company Total (KESC) 01756MW Independent Power Producers Total (IPPs) 06365 MW Pakistan Atomic Energy Commission Total (Nuclear) 00462 MW Total Power Generation Capacity of Pakistan (including all sources) 19855 MW Hydro Electricity generated by WAPDA varies between two extremities i.e. between minimum of 2414 MW and maximum of 6761 MW depending upon the river flow through the whole year. Total Power Generation Capacity of Pakistan (including all sources) is 19855 MW and the electricity demand (as of today 20-04-2010) is 14500 MW and PEPCO is merely generating 10000 MW.
8000 7000 6000 5000 4000 3000 2000 1000 0 Pow er from Oil 7200 6500 5800

Pow er in MW

450 Increasing electricity rates in Pakistan By: Mirza Majid Ali Pow er from w ater Pow er from gas Pow er from Nuclear

150 Pow er from Coal

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So it is obvious that these 15-20 hrs power shutdowns in most parts of the country are not because of the lack of generation capacity but only because of IMF / World Bank policies imposed on our nation by Govt. The Power Generation companies are not buying Furnace Oil from PSO by saying they dont have money to do that but we are all paying for Electricity that is generated from Furnace Oil. This is the reason that top refineries like PRL are operating at 40% capacities. IMF / World bank has imposed to reduce budget deficit by importing less crude oil. But due to this fact all our industries are under severe crisis. None of our political party who are in Assembly is ready to speak on it because everyone is blessed by US / IMF / World Bank. (http://alaiwah.wordpress.com/2010/06/23/pakistan-total-power-generation-capacity19855-demand-14500-mw-why-the-load-shedding-then/)

Result of Questionnaire about Increasing Electricity Rates in Pakistan:

Sr.No Satisfaction: 1
Strongly Agree Agree

2 7 9 8

3 9 1 0

Disagree Strongly Disagree

1. 2.
3.

Should the rates of 2 Electricity be according to IMF? Can we produce electricity 19 from coal at low cast? Should we require modern 21 technology for the production of electricity at Should we depend on oil 2 for the production of electricity?

12 1 1

4.

13

10

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1) In this 40% of people strongly disagree the rates of electricity should be according to IMF. 2) In this 63.33% of people strongly agree electricity produce from coal at low cast. 3) In this 70% of people strongly agree production of electricity at low price using modern technology. 4) In this 43.33% of people disagree depend on oil for the production of electricity.

We Want Electricity In Pakistan:

Electricity now is @11 Rs. per unit, and it will increase after every two months as directed by (American) IMF policies. Also CHINA offers to Pakistan Electricity for just Rs.200 Monthly Bill and Unlimited Usage of Electricity but our government is not taking the offer seriously. This is because there will be neither kick backs nor any commissions to be pocketed Increasing electricity rates in Pakistan By: Mirza Majid Ali

UMT 16 Electricity rates in Pakistan by the strong mafia of politicians and bureaucrats.

Conclusion:
To sum all reasons for increasing electricity rates are mainly inefficient government policies, lack of governments attention to this issue and lack of future planning. Pakistan has vast coal reserves but a very less percentage of electricity is produced by coal. Pakistan also has potential for wind and solar energy, which can be used to overcome this energy crisis. New dams must be built and government now has to shift to alternate sources for electricity production and also has to minimize the use of oil and has to overcome the technical and line losses to control the increasing electricity prices in country. The transmission system needs to be upgraded after every 5-10 years to minimize the line losses. The transmission system in Pakistan is over aged, but still it is in use. Government should have to reorganize its policies and has to plan for the upcoming future to overcome this energy crisis in future. I am also thinking that coal and hydro is best to solve the energy crisis in Pakistan. The quick solution of energy crisis is wind energy because its initial cost is very low. But we cannot finish the energy crisis completely but can only reduce the gap of energy crisis. If we plan for long term we should go to coal energy and hydro. Because Pakistan has the lot of coal reserves. So government should take steps to refine the coal and produce electricity with coal. If government constructs the new dams (large dam, run of river) and focus on hydro project which was schedule to complete in 2008 but yet not completed. The cost of per unit electricity with the hydro power plant is less than 1 rupee. Pakistan is the 5th largest coal reservoir all the world. Pakistan has enough coal that Pakistan can produce about 100000 MW of electricity which is 5 times more than todays electricity production. Its better to be afraid of the dark now, then to be afraid for your whole life . . . save electricity. . .

Recommendations/Solutions of Energy Crisis:

Energy crisis can be curtailed by: i). Reducing unnecessary energy use: o Usage of electricity saving devices o Awareness campaign for energy saving o Reduction in unnecessary transportations by developing good public transport systems and strengthening Pakistan railways o Reduction in industrial uses with installation of effective equipment/ energy efficient and with increasing efficiency of workforce (cost effective) o Decreasing reliance on rental power projects, because instead of doing any good, they are increasing prices of electricity. o Decreasing line losses by using efficient power transmission cables ii). Developing new energy resources : Increasing electricity rates in Pakistan By: Mirza Majid Ali

UMT 17 Electricity rates in Pakistan o Tapping indigenous resources (Thar coal) o Using renewable resources (water) by constructing new dams and hydro power plants o Import of natural gas by IPI (Iran Pakistan India) and TAPI (Turkmenistan, Afghanistan, Pakistan and India) pipelines o Import of electricity from Tajikistan -through Pak Afghan Tajikistan transmission- and Iran (approximately 1000 MW from each of them) pipelines o Utilizing alternative energy resources : Wind power Biodiesel /Biomass Solar Tidal o Enhancing civilian nuclear capacity

Bibliography:
Bug, E. D. (2007). Energy lost reduction in Wapda. Islamabad. Chaudhry, A. A. (April, 2010). A Panel Data Analysis of Electricity Demand in Pakistan. 15. HAQ, D. N. (July 10, 2008.). ENERGY CRISIS IN PAKISTAN. Lahore. News, T. (2010). Pakistan producing expensive electricity in region: study. lahore: The news. Pesnani, M. R. (2010). Fuel Price Trends (Vol. 1). islamabad: STATE BANK OF PAKISTAN. Qayyum, M. A. ( 2009 ). The demand for electricity in Pakistan. Sifat Shah, A. R. (April 2010). Crisis of Electrical Energy in Pakistan and Future guide. Sifat Shah, M. L. (2009). Crisis of Electrical Energy in Pakistan and Future guideline for Policy makers. 9 (9). TARIQ, M. S. (2008).Resedential demand for electricity in Pakistan (WAPDA, 2011) ( Nepra Pakistan, 2009) (http://alaiwah.wordpress.com/2010/06/23/pakistan-total-power-generationcapacity-19855-demand-14500-mw-why-the-load-shedding-then/) (dawn news Sunday, 20 Sep, 2009)
( Canadian Journal on Electrical and Electronics Engineering Vol. 1, No.3, April

2010) (The national news paper Published: May 22, 2010) Increasing electricity rates in Pakistan By: Mirza Majid Ali

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( book ENERGY CRISIS IN PAKISTAN EDITOR DR NOOR UL HAQ) CSS Forum - CSS Examination Preparation & Civil Service of Pakistan

Wikipedia (2010, May 22). The Nation . Abbasi, A. H. (2010, 04 Thursday). Hydropower Clean power. Dawn News . Baig, M. I. (2009, November). Solution to Energy Crisis. Dawn News . Electrical and Electronics Engineering. (April 2010). Candia . Energy Crisis and Pakistan. (2010, October 23). Retrieved from www.friendsmania.com. Haq, D. N. (2009). Energy Crisis in Pakistan. Lahore. Qazi, M. u. (2010, March 29). Dawn News . Reference Websites: www.pepco.gov.pk www.wapda.gov.pk www.lesco.gov.pk www.nepra.gov.pk

Increasing electricity rates in Pakistan By: Mirza Majid Ali