Posts Tagged ‘ Load shedding ’

Pakistan _ Nuclear-Armed but Short of Electricity

By Gujar Khan for The Associated Press

Image

A woman named Rehana Yasmin struggles to keep her sick 2-year-old granddaughter cool in a sweltering hospital where working air conditioners are rare and electric fans are idle for much of the day.

Elsewhere, households can’t rely on their refrigerators, and at textile factories, factory workers say they can’t operate their machines for enough hours to earn their daily bread.

All are victims of Pakistan’s biggest problem, one that recently brought down a government — not the U.S. drone war in its backyard, not its permanent confrontation with India, but its inability to generate enough electricity. Pakistan, nuclear-armed, can’t deliver a reliable power supply to its 180 million citizens.

“Power, power, power is the problem. It’s power at home, in the workplace, on the streets,” said Rizwana Kauser, head nurse at the hospital in the city of Gujar Khan, about 40 miles (65 kilometers) from the capital, Islamabad.

Power can be out for up to 20 hours a day in the summer. TV coverage may be lost in the middle of a cliffhanger cricket match. Office meetings are scheduled around anticipated power cuts. Without electric fans, mosquitoes proliferate. People get stuck in elevators. Meat rots in refrigerators.

The shortfalls that became the top issue in the recent election are estimated at 3,500 to 6,000 megawatts — up to a third of total demand.

The problems result in part from bad bill-collecting, which leaves utility companies short of funds to pay for the oil that powers much of the production, which in turn means the state oil company can’t buy enough oil on international markets.

Power theft is rampant, often consisting of simply slinging a hook over a conveniently placed electricity wire. The infrastructure of the state-controlled utility companies around the country is outdated, the companies are inefficient, and power plants are heavily dependent on oil despite Pakistan’s abundant coal resources, experts say.

Fixing the problems is likely to take years, leaving Nawaz Sharif, the new prime minister, with a gargantuan task. But with Pakistanis impatient for action, the government has announced plans to pay off about $5 billion owed to companies throughout the supply chain within 60 days. It’s not a long-term solution but it would at least offer the government some breathing room.

And that’s just to keep the electricity flowing. Pakistan also has a problem with delivering natural gas to households and companies, and that too will need solving if the new government hopes to last.

For Rehana Yasmin, relief can’t come too soon. She has been at the public hospital in Gujar Khan for a week, tending to her granddaughter who has dysentery. She brings her own water because there’s no electricity to run the pump of the hospital well. She buys homemade straw fans hawked in the hospital’s hallways.

For the past week, Yasmin said, “during the night we hardly have two hours of electricity and during the day, it’s minimal. This lack of electricity is making children sick and making the elders sick as well.”

Public hospitals like the one in Gujar Khan, which care for the majority who can’t afford private hospitals, generally draw power from two grids, but nowadays, especially in the hot months, there’s sometimes no electricity coming from either grid.

The hospital uses a generator during operations, but sometimes has to resort to ice to keep medicines cool.

 

It is a struggle simply to maintain basic sanitation, said Kauser, the head nurse. Wounds take longer to heal. And “When there is no water, there is no cleaning,” she said. “How can you wash the sheets?”

In the past, power cuts (“load-shedding” in Pakistani bureaucratese) used to be much shorter and followed patterns that allowed people to plan such routine activities as scheduling an office meeting or taking a shower. But it was the newer phenomenon of “unscheduled load-shedding” and the much longer outages that raised tempers to the level of an election issue.

Dr. Ashraf Nizami of the Pakistan Medical Association said that doctors are seeing more psychological effects of load-shedding, such as stress and depression.

“It is a torture for the medical community and the patients,” he said.

It’s also bad for business.

The looms in one of Waheed Raamay’s workshops are silent and soon to be sold as scrap metal. This workshop, a graveyard as Raamay calls it, is a sign of how the electricity crisis hurts Pakistan’s economy.

“This is not just the story of this single factory. There are dozens of factories in this particular area, and there are hundreds of factories in this city that have closed down due to this power crisis,” said Raamay.

Faisalabad, the third-largest city in Pakistan with a population of about 2.6 million inhabitants, is known for its textiles. But from the low-end workshops that produce for the domestic market to the warehouse-sized factories that export sheets and pillowcases to international chains, that industry is hurting — badly — as a result of the electricity crisis, say workers and factory owners.

Analysts and government officials estimate that Pakistan loses about two percent of its GDP every year due to the electricity crisis. The Pakistan Textile Exporters Association estimates about 150,000 jobs lost in Faisalabad and surrounding Punjab province over the last five years.

In the part of the city where fabric is made for local consumption, the clicking and clacking of the machines rises and falls with the load-shedding.

Workers show up hoping for a day’s work, knowing they are hostages to power cuts. A show of hands indicates all the workers are deeply in debt to their grocery stores or the factory owners. Angry job-seekers have taken to the streets in protest.

“We don’t have money to bury our dead,” said Mohammed Haneef, who was missing part of one finger from a loom accident. “My mother died and I had no money so I had to borrow money from the owners. A year later my father died, and I had to borrow money. … The situation is bad.”

Kurram Mukhtar, head of Sadaqat Limited, one of Pakistan’s leading textile manufacturers, said that from 2006 to 2010 many companies in the city and surrounding area were bankrupted by the power crisis. Owners who survived decided they needed energy independence. Now, at Mukhtar’s factory, piles of coal sit next to a massive generator that keeps the workers stitching, cutting and dying fabrics through the load-shedding.

But Mukhtar said that the cost has cut deeply into his profits, leaving no money to invest in new technologies.

He doesn’t have the option chosen by Aurangzeb Khan in the northwestern town of Mathra when his power was cut off last year over unpaid bills: Khan resorted to the tactic Pakistanis call “kunda,” the hook slung over a convenient electricity pole.

He said he did it because it pained him to see his kids suffering through the August heat. “I am not stealing electricity just for fun or pleasure but I don’t have any other option,” he said.

Such non-payment is rampant. Even government agencies are known to default on bills. And customers can always go to court to obtain a “stay-order” that forces the power company to keep supplying electricity.

“There is no concept of paying the bill,” said Ashfaque Khan, the dean of the business school at the Islamabad-based National University of Sciences and Technology.

A report in March commissioned by the Planning Commission of Pakistan estimated that the delinquencies added up to about 86 billion rupees (about $870 million) in lost revenues.

The Peshawar Electric Supply Company, whose coverage area includes Khan’s home, was said to be one of the worst at bill-collecting, though it suffers the added problem of being a target for violence. In April, militants attacked a grid station outside of Peshawar, killing eight policemen and electric company officials.

The new government says it wants to increase bill collection but has given few specifics about how they’ll go about it. People like Aurangzeb Khan say they want to see improved service before they pay up.

“I know stealing is not good,” he said, “but if we get uninterrupted supply of electricity at a reasonable price we shall pay the bills.”

Advertisements

Priority in Pakistan: Turn On Lights

By Saeed Shah for The Wall Street Journal

Image

When Nawaz Sharif starts his new term as Pakistan’s prime minister on Wednesday, 14 years after he was ousted in a military coup, he will focus on turning on the lights in a nuclear-armed nation that has been increasingly starved of electricity.

Power outages of 12 to 20 hours a day have crippled industry and made life miserable for households, a problem that worsened under the previous government of the Pakistan Peoples Party. Electricity shortages cost Pakistan some $13.5 billion a year, equivalent to knocking 1.5 percentage points off the economic-growth rate, Lahore’s Beaconhouse National University said in a report this year.

After Mr. Sharif is sworn in, he will deliver a speech outlining his strategy for solving the electricity emergency through wide-ranging intervention, bond sales and privatizations, aides said. The financing of the electricity rescue plan would be laid out in the budget to be announced next week by incoming Finance Minister Ishaq Dar, they said.

The new administration plans to pay off what it says is $5 billion in debt that has paralyzed the industry, build new power plants and privatize the sector in a multibillion-dollar overhaul that could attract foreign investor interest, the aides said.

The challenges are great. The previous government poured billions into the sector without eliminating the debt or significantly increasing the supply of electricity. The industry is riddled with corruption and depends on expensive oil for power generation, instead of cheaper gas or coal.

The most pressing issue is the chain of so-called circular debt that runs through the sector: The government keeps the price of electricity to the consumer below the cost of production, but can’t afford to make up the shortfall. It means that oil importers are owed money by power plants, which are owed money by distribution companies, which in turn are owed money by consumers.

“First, we need to write a check,” said Miftah Ismail, an energy adviser to Mr. Sharif, who drew up the energy policy in the party’s election manifesto. “We will pay off the stock of circular debt. It is choking the system. No fresh investment will come into Pakistan unless you get rid of circular debt.”

Although the incoming government has given the level of this debt at $5 billion, a government think tank, the Planning Commission, issued a report in March this year placing it at $9 billion at the end of 2012.

The new administration would borrow the money from banks and also take on the debts owed to the banks by various energy companies and government-owned entities, Mr. Ismail said. Then the government would plan to tap domestic and international bond markets.

A domestic bond issue picked up by local banks would be the most likely scenario, said Ashraf Bava, chief executive of Nael Capital, a brokerage in Karachi. Pakistan would need to improve its credit rating and balance of payments before approaching international capital markets, he said.

“The local banks will have no choice. They’ll have to do it,” said Mr. Bava. “Obviously they’ll be offered a decent return.”

Pakistan, a country of 180 million people, is currently producing some 11,000 megawatts of power, though that dropped last month to less than 9,000 megawatts, compared with demand of at least 17,000 megawatts.

By comparison, installed generation capacity in Indonesia, a country of 240 million people, is 41,000 megawatts, according to a 2012 report from PricewaterhouseCoopers.

Pakistan’s supply shortfall results in power being switched off to households and industry for part of each day on a rotating basis across the country—outages known as “load shedding.”

After paying off the debt, the new government plans to pursue a three-pronged strategy, the aides say. The government would aim to cut line losses and electricity theft, shift power plants from oil to coal, and eliminate subsidies to consumers. Pakistan currently charges consumers around 9 cents per kilowatt-hour for electricity that costs 12 to 14 cents to produce.

Those who use minimal amounts of electricity would continue to get power cheaply, a cost that would be borne by the full fare paid by heavier users—including the middle classes, who form Mr. Sharif’s core constituency, as well as Pakistan’s elite. But if the plan works, Mr. Sharif’s aides said, the cost of power production and prices would come down again.

“There’s no reason why we should be subsidizing those who can afford to run air conditioners,” said Mr. Ismail.

Mr. Sharif’s plan envisages converting three or four of the biggest power plants, which currently burn oil, to coal. Experts estimate such a plan would cost about $2 billion but would pay for itself in savings in about a year.

New coal-burning power stations would also be commissioned, which the incoming government says would take around three years to come onstream. Government-owned generation plants and the grid companies would be put under new management and privatized.

“We will nibble at this problem from many angles as we go along,” said Sartaj Aziz, an adviser to Mr. Sharif on finance and a former finance minister.

Foreign companies rushed into Pakistan’s electricity sector in the 1990s, when new private generation plants were allowed, on lucrative terms. Oil prices were low at the time, so oil-burning plants were built.

However, frequent changes in governments and policies that followed, together with the circular debt issue, chased away most of the foreign interest. The last major American investor, AES Corp.,sold out in 2009.

GDF Suez of France and Malaysia’s Tenaga Nasional Berhad are the remaining foreign firms active in Pakistan’s energy sector.

Naveed Ismail, an independent energy-sector expert who previously worked with the government, said that 48% of Pakistan’s thermal generation came from burning furnace oil, the highest such proportion among any major countries, while contribution from much cheaper coal, the main source of generation in India or China, was close to zero.

“Pakistan just has to learn from the rest of the world. It doesn’t have to reinvent the wheel,” he said. “The issue is producing affordable electricity. No new capacity should be added unless it brings down the average cost of power.”

Helping Pakistan with its electricity crisis has been a major focus of American aid in recent years. Since October 2009, the U.S. has spent $225 million on energy projects in Pakistan, according to the U.S. Embassy in Islamabad, adding more than 900 megawatts to the country’s generation, with schemes for upgrading power plants and dams.

%d bloggers like this: