Rental power projects to cause another mega crisis: ex-KESC chief

[Naveed Yaseen]

By Umer Bhatti
FORMER Member Power Wapda and the ex-chairman of the Karachi Electric Supply Company, Syed Tanzeem Hussain Naqvi, has said that the impression in the government circles as well as in the general public that Wapda/Pepco’s annual loss of Rs 130 billion is due to the inability in controlling the power theft is not correct.

Talking to The News, he said the actual reason for the said loss was the increase in the annual expenditure along with high payments to the Independent Power Producers, which cannot be attributed to Wapda /Pepco. In fact, the bulk of power is being bought from the IPPs, which are supplying at the rate of approximately Rs 8 to Rs 10 per unit, as against Wapda/Pepco’s own thermal power plants cost of Rs 3 to Rs 4, he maintained.

Naqvi said that until 2003, the power sharing was following: Wapda’s hydro power stations were giving 40 percent, its thermal power stations were also giving 40 per cent and the IPPs were giving 20 per cent of the total power production. But after year 2003, he said, Wapda’s own thermal plants started de-rating its capacity and it was not allowed by the previous government to either add new power stations and or to upgrade the old ones. As a result in Wapda’s generating capacity de-rated from 6,000MW to 2,500MW.

He said the current estimated position of Wapda’s dependable capacity was following: Wapda’s hydro power stations were giving 30 per cent of the total power production, its thermal power stations 15 per cent and the IPPs were providing 55 percent.

If one evaluates the generation capacity with tariff revenue cost earning, the results are alarming, i.e. Wapda/Pepco’s generation cost is in the range of Rs 8.25/unit, its revenue earning cost is in the range of Rs 5.75/unit, hence, the loss is Rs 2.50/unit, he maintained, adding that if the loss per unit was multiplied with the total units sold in a year, it reaches the alarming high figure of Rs 130 billion per annum. (52 billion units multiplied by Rs 250 make Rs 130 billion).

The former KESC chairman said had Wapda been allowed to upgrade its own old power stations or add new generating plants at various places like Shahdara, Faisalabad, Multan, Guddu and Jamshoro, Wapda’s own thermal generation would have increased from 15 per cent to at least 40 per cent, which could reduce Wapda’s generation cost from Rs 8.25 per unit to Rs 5/6, making Wapda a profitable organisation even with the current tariff structure. He said not to allow Wapda to add its own power station by previous governments had not only subjected the authority to loss of billions but had also caused loadshedding of 2,500 to 4,000 MW last season.

Naqvi said apart from the abovementioned turmoil, the present government was bringing Rental Power Projects which were going to cost tariff rate of $0.15 to 0.16 (Rs. 12.5 to 13.5 /unit), paving way for another mega crisis. He said it was expected that the rental power project plan would incur a total loss of Rs20 billions along with more expenditure in terms of import of extra furnace oil. The government should have allowed Wapda to add new power stations on a war-footing basis, to not only to stop loadshedding but also making Wapda a profitable organisation, he maintained.

The former KESC chairman said another aspect worth consideration was that the National Electric Power Regularity Authority (Nepra) and the government of Pakistan had approved a 24 percent tariff increase by June 2010. Giving the details of the tariff raise he said: tariff increase in May 2009 was 31%, tariff increase by June 2010 would be 24%. He said if one converted such tariff increase into unit costs, it would give the following figures; average selling cost of Wapda in May 2008 was Rs 5.70/unit, it was Rs. 7.50/unit (increase of 31%) in May 2009 and it would be Rs. 9.33/unit (increase of 24%) in June 2010. In other words, he said, the tariff increase would be 64%.

Mr Naqvi said it was true that Wapda/Pepco’s annual loss of Rs 130 billion could be controlled by increasing the tariff based on the new generating cost of Rs 9.40/unit against selling rate of Rs. 9.33/unit.

But Nepra and the government of Pakistan had forgotten that tariff increase up to Rs. 9.33/unit would not only increase the theft of power but it would also create public outcry and problems for industrial and commercial consumers, he added.

Suggesting some solutions to the crises, the former KESC chairman said first of all the government of Pakistan must allow Wapda to add its new power plants, not only to reduce the cost of generation but also to decrease dependence of power supply on the IPPs and to decrease the import of furnace oil. Secondly, he said, coal-based power plants must be installed on an urgent basis by awarding contracts to two to three parties on a technical competency basis.

Thirdly, he said, the Kalabagh Dam must be started; it had been stopped just on consensus grounds which had nothing to do with technically and financially feasible project. No other country needed such consensus on these kinds of projects, India had constructed 28 dams out which 2-3 were on our rivers, he said. Finally, he said, Wapda/Pepco must be allowed to operate independently on their own administrative and technical merit.

http://www.thenews.com.pk/daily_detail.asp?id=203561