PAKISTAN ECONOMIC POLICY

POWER CRISIS

Presented by: Hashim Mamsa Misha Rizwan Syed Usamah Ahmed

Situation Overview
Energy is the key determinant of economic development and prosperity of society The growth prospects of the economy in 2010-11 were constrained by the availability of energy. Dependency on the imported oil that put substantial burdens on the economy The growth of consumers stood at 4.3 percent as it reached 20.1 million consumers as compared to 19.3 million Electricity consumption increasing rapidly Only 65 to 70 percent of the 172 million population has access to electricity. The demand of electric power could exceed supply by about 6000 MW

The Current Power Consumption Mix

Encourage attainment of optimal energy mix through fuel substitution by: promoting energy efficiency renewable energy interregional co-operation

 Out of 20,681 MW, the hydro production is 6,555 MW and the thermal production is 14,126 MW Plagued with inter-corporate circular debt which constricted growth in the power sector
Various organizations in the energy sector had Rs.258.5 billion 1/10 of Pakistans total annual budget PSO, OGDCL, KESC, PPL, PARCO, PEPCO, SSGCL

Capacity not sufficient to meet demand

3.07% increase in electricity generation per annum

Set off by 7-8% growth in demand per annum

The demand might increase to
19,245 MW to 20,785 MW by year 2011; 22,448 MW in 2012; 60,000+ by 2020; while by year 2030, the expected demand on the system would be more than 75000MW

Potential to generate total 40,000 MW from Hydro resources but due to insufficient exploitation; country is able to extract only 6500 MW from this resource

Govt. role in Power crisis Iran and Chinas proposal to Pakistan

Effects
Low production
Agriculture Sector- not able to export financial and economic loss Industrial sector being destroyed unemployment Textile industry capacity reduced

Inflation effecting fixed income group

Oil imports draining foreign reserves and encourage taking loans fiscal deficit

 To cover for high prices of oil prices of electricity increased

Creation of circular debt

Increase in basic necessity leading to increase in prices of goods & services cost push inflation Social effects

Thar Coal Project

Initial project
1300 MW in 36 months Increase by 1300 MW each year

Coal resources estimated at over 185 billion tones, including 175 billion tones, identified at Thar coal fields Exploited only 3300 metric tons for power generation Distribution and lease of coalfields for extraction and establishing power plants
400 MW coal based power plant to China National Chemical Engineering Group Corporation Cougar Energy UK has been allocated Block-III establishment of a 400 MW power plant Bin Daen Group of UAE has been allocated Block-IV for developing coal mine and installing 1000 MW power plant Oracle Coalfield Plc. UK has been allocated Block-VI for developing a coal mine and installing power plant of 300 MW extendable up to 1000 MW

Unutilized Resources of coal why?

Lack of infrastructure

Lack of foreign investment

Increase in water consumption Petroleum lobby

Critique
Thar coal too moist High pollution

CNG Crisis
Start of 2012 was marked by strikes against the Government by the CNG association due to: i) Increase in CNG prices ii) Ban on provision of CNG to transport vehicles

 Governments encouragement of use of LNG and LPG is a conspiracy against CNG business.

Government claims unavailability of gas while the Chairman of All Pakistan CNG association stated there is sufficient gas.
2500 cubic meters gas required for uninterrupted supply
Nov 30 2639 cubic meters of gas Dec 30 2823 cubic meters of gas

 Government giving the impression that there is a shortage of gas in the country Fertilizer sector been exempted from tax while CNG sector pays 46% tax but still not getting supply regularly

Government restricting the usage of CNG and force to convert to LPG which is more expensive than petrol
CNG sector uses 7.8% of gas in the SNGPL system where as 42% of gas goes to the industrial unit.

Inflation Crisis
The increase in the energy prices have led to an increase in inflation in Pakistan The high prices of fuel and electricity combined have created long-term cost push inflation Increased prices affected various income groups Petrol prices increased to Rs. 97.66 CNG price increased to Rs. 70.15 in sindh zone

 The increase in prices of petrol is due to crude oil prices increase globally - $ 105.43
Oil price increase has lead to the increase in the per unit cost of electricity The rise in CNG prices as claimed by the government is due to:
gas shortage increase in the consumption of CNG

Standard of living effected leading to increase in prices of other commodities

Causes of Power Crisis

Economic & Political instability
Government has undertaken projects which have not proved to beneficial IPP program in 1990 turned out to be counter productive Dumping of WAPDA development program in 1980 Barring WAPDA from thermal generation in 1990 Binning of the state engineering corporation plan to indigenize power plants in 1990s Persistent shelving of the Kalabagh dam Approval of RPPs in Zardaris government was not beneficial to pakistan

 Siltation process
Usable storage capacity of Tarbela Reservoir being reduced from 9.68 million acre feet to 6.77 Siltation is increasing due to rampant deforestation in catchments of the river Indus

Aging Equipment
Power losses due to faulty distribution system
Transmission and distribution losses increased by 0.2% in July to Mar 2010-2011 period Power purchase decreased due to unavailability of DHA cogen 80 MW power station

Hydro power capacity has remained static at 6555 MW over the past 10 years
The controversy regarding the construction of Kalabagh dam

Alternative Energy Sources

Coal- is it effective in the long run?

Thar coal has a fixed carbon content of less than 22 % and has to be converted into electricity onsite Strip mining requires abundant water Contaminate water supply Technology like underground coal gasification the solution?

Better options: Wind Energy

Conversion of wind energy into a useful form of energy using:
wind turbines to make electricity, wind mills for mechanical power, wind pumps for water pumping and drainage

Wind power as an alternative to fossil fuels AEDB is currently facilitating 21 projects having the capacity of 50 MW each Pakistan Economic Survey 2010-11 Incentives to IPPs like tariff determination announced by NEPRA

Wind energy - continued

The cost of equipment is high as the demand is increasing In the long run Pakistan can enter into technology transfer agreements with foreign manufacturers to domestically produce it

Nuclear Energy
Safe, economical and environmental friendly Enhances security of electricity supply Currently PAEC is successfully operating three nuclear power plants.
KANUPP CHASNUPP I CHASNUPP II

Nuclear Energy- Continued

Government has mandated PAEC for installation of 8800 MWe Nuclear Power capacities by 2030 Pakistan planned to purchase two nuclear power plants from China

Natural Gas- exploration and import

Government has announced incentives like security guarantee and better prices to international gas exploration companies Pak Defense In terms of gas import
IPI gas pipeline TAPI gas pipeline

Solar energy
Advantages manifold over the disadvantages Solar energy can be used for industry dependent on steam generation by oil and gas fired boilers Pakistan has a solar potential of 5-6 KWH/m/day off irradiation in most areas AEDB plans to provide electricity to 400 villages using solar home systems

Solar Energy- continued

Street lights and billboards can be taken off from the grid by converting the loads to solar AEDB involved in a pilot study with the World Bank to study replacement of conventional water heaters with solar ones

Bio Diesel
Biodegradable and non toxic Can be blended with standard diesel and used in vehicles Government has given a target of replacement 5% of the total petroleum diesel consumption with bio diesel by 2015 PSO provided with a Production Plant of Bio diesel

Solutions and Recommendations

 Initiate the building of the Kalabagh dam Complete the construction of the Bhasha dam

Government taking initiatives for paying off circular debt De-silting to prolong the life of Tarbela Dam
Monitoring and taking action to minimize power thefts and non payment of bills

 Attracting FDIs to invest in the power sector Repairing the grid stations and employing means to recover line losses The use of alternate energy sources can reduce inflation caused as a result of inflation