The Power Sector Crisis (FreePakistan Newsletter # 141)
0 The power sector crisis
By Dr. Ashfaque H Khan
0 Letters to FreePakistan
0 Issue of the month: Democracy with a vengeance
Download the complete Newsletter # 141 in PDF
0 The power sector crisis
By Dr. Ashfaque H Khan
0 Letters to FreePakistan
0 Issue of the month: Democracy with a vengeance
Download the complete Newsletter # 141 in PDF
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Every dime the government spends—whether acquired through taxation or borrowing—is a dime that someone in the private economy won’t be spending. If people are not spending already—which is not the case these days—we must look to the earlier government interventions that brought about that condition—and then repeal those anti-market corporatist policies, regulations, and taxes.
[Sheldon Richman, “Bastiat Misread” (August 24, 2012)]
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THE POWER SECTOR CRISIS
By Dr Ashfaque H Khan
[The writer is principal and dean of NUST Business School, Islamabad. Email: email@example.com. This article first appeared in The News on August 7, 2012.]
Pakistan is currently facing the worst power crisis in its history. The resulting power cuts in the form of loadshedding, often lasting 8-18 hours, have served to constrain economic growth and development and also adversely affected the lives of the people, poor or even middle-class.
The power sector crisis is not a recent phenomenon. Such crises have existed in Pakistan since the 1980s with varied intensity but worsening in the last four years. A task force on energy constituted in 1994 found loss to industrial output due to loadshedding to be in the region of Rs12 billion. A survey of 200 industrial enterprises which was conducted by the World Bank in 1995 found that, on average, these industries lost 21 workdays in a year due to electricity shortage.
Then came the 1994 Power Policy of the government which opened electricity generation to the private sector. With the induction of the private sector in power generation, the fuel mix in electricity generation changed in favour of imported furnace oil. Until 2002, this policy worked reasonably well because the oil prices in international market remained low, ranging between $10-25/barrol. With the United States moving into Iraq in 2003, the international price of fuel started rising and so did the cost of electricity generation. The cost of generation, however, increased drastically in 2007-08 with an unprecedented surge in international fuel prices. Sharp depreciation in exchange rate and heavy reliance on petroleum sector for tax revenue after the NFC Award further compounded the difficulties. Today, electricity generated from furnace oil costs Rs16-17/unit.
Why has the power crisis worsened in recent years? Frankly speaking, Pakistan doesn’t face electricity shortages today. It has installed capacity of 22,500MW as of 2011. With power plants generally operating at 70 percent capacity, Pakistan can easily produce 15,750MW of electricity and meet its requirement comfortably. It is interesting to note that with installed capacity of 19,430MW in 2007, Pakistan produced 98,213GWh (Gigawatt Hour) of electricity. But with 22,500MW installed capacity in 2011, Pakistan could produce 94,384GWh of electricity, almost 4000GWh less. Is it not surprising? While installed capacity has increased, electricity generation has declined.
Why has it happened? Several factors have contributed to the decline in electricity generation. These include the T&D (transmission and distribution) losses, rising power theft, growing circular debt, rising inefficiency of power plant, diminishing state authority, and, most importantly, substantial decline in the availability of gas for power generation. In 2005, 504 billion cubic feet (BCF) or 43.5 percent gas was allocated to power generation but the share declined to 337.4 BCF or 27.2 percent in 2011, which is a reduction of 33.1 percent in six years. Gas allocated to transport sector, on the other hand, increased from 24.4 BCF (2.1 percent) to 113.1 BCF (9.1 percent) between 2005-2011 (an increase of 363.5 percent).
What have been the implications for electricity generation? In 2005, electricity generated from furnace oil stood at 13,516GWh, which increased to 33,186GWh in 2011. On the other hand, electricity generated from gas stood at the peak of 43,472GWh in 2005 but declined drastically to 25,879GWh in 2011. In other words, Pakistan moved from relatively low cost of electricity generation (Rs5-6/unit from gas) to high cost generation (Rs16-17/unit from furnace oil) in the last six years.
Higher cost of generation has forced the government to increase the price of electricity by more than 100 percent in the last four years. In a recently defended PhD thesis, Faisal Jamil of Quaid-e-Azam University Islamabad found a strong positive relationship between the rise in the price of electricity and power theft. On one hand, the government continued to increase power tariff and on the other hand power theft continued to rise with little impact on revenue to utility companies. I have been stating time and again that raising power tariff is not a solution and will never be a solution as we move forward. My position has been vindicated through the doctoral dissertation.
What can be done in the short run to address power crisis? Several solutions are in order. Firstly, as we have seen that the diversion of gas from power to transport sector has aggravated the power crisis, it is therefore suggested that through price mechanism the government must discourage the use of gas in transport sector. The price of CNG should be brought at par with motor gasoline in a phased manner so that people will have little incentive to use CNG for transport sector. Secondly, the gas so retrieved from transport sector must be diverted to efficient power plants operating at over 50 percent efficiency level.
Thirdly, there are highly inefficient power plants currently operating at 18-25 percent efficiency level. These plants have outlived their useful life and must be dismantled and the private sector may be invited through competitive bidding to set up new plants in the same area. The gas earmarked for the dismantled plants must be given to the newly setup power plants. With the same amount of gas, the new power plants will generate more electricity. Fourthly, the provision of free electricity to Wapda/Pepco employs must be withdrawn forthwith as this has become a major source of power theft. Fifthly, the government must go for a performance-based appointment for the head of distribution companies. Sixthly, the finance department of Pepco/Wapda be strengthened by inducting professional finance experts.
The power crisis in Pakistan is not because of the shortages of electricity. It is the outcome of misgovernance. The crisis is self created. Wrong policies have been pursued by the government. Development financial institution must also share the blame as they have been advising the government to pursue a one-track policy, that is, to keep increasing the power tariff. This policy has not worked and will never work. The power sector needs urgent and bold action. It needs reform more than a price hike. Is the present government ready to take difficult decisions in this regard? [Courtesy The News]
[Dr Irfan Zafar, Islamabad]
President and PPP Co-chairman Asif Ali Zardari has said that “He knows how to crush Sharif’s Pride”. Do any of our Politicians have any to start with? [Pakistan Observer]
CIRCUS OF TALK SHOWS
[Malik Tariq Ali, Lahore]
Most of the talk shows on prime time have been reduced to a match of shouting obscenities, display of intolerance and unsuitable for families to watch. What message are they giving to our youth?. Almost every party has share and a viewer cannot understand what is happening. This affliction is dominant amongst PPP’s Faisal Raza Abedi, Sharjeel Memon, PML(N)’s Abid Sher Ali, PTI’s Imran Ismail, Inamullah Niazi, MQM’s Wasim Akhtar and PML(Q)’s Kamil Ali Agha, . One wonders what sort of role models are these people, and what prompted their political parties to choose them for this task.
Instead of a meaningful discussion, which can take place in an educated forum observing parliamentary ethics, what you witness is everybody talking simultaneously, shouting obscenities, or calling their adversaries thugs and making a monkey of themselves. Are these the men or women whom we expect to deliberate and resolve the colossal problems this nation faces? How can we expect them to restore rule of law, when they cannot maintain a decorum in public. Will these people address the issue of target killings, unemployment, acute power shortages, extortion, fanaticism, kidnapping from ransom and exploitation of religion, when they cannot have decency to hear other’s point of view, or respect right of dissent. It seems every political party in this country has become a cult, whose members have to prove that they would not tolerate any criticism of their leadership. Does this display a decline in our moral values, or does it reflect only upon our decadent political culture which must reform itself. [Pakistan Observer]
Letters to FreePakistan
UPROOTING THE ELITE THROUGH ELECTIONS
[Sher Gondal, Mandi Bahauddin]
Definition of democracy as taught in schools and colleges is “government of the people, by the people, for the people. It is further explained that this definition is meant “rule by the (simple) people”. This definition does not cover democracy being practiced in our country. The democracy being followed currently does not involve common and the downtrodden people in decision making. No parliamentarian consults with people of his respective constituency for taking their opinion. Their claims that they had mandate of 18 crores of people are false. Rights of people to live, to work, to express, to preach their religions freely are not protected. They have no say to decide and plan their future. They are treated like herds of animal through terror of security forces. The democracy practically seen is a maid servant of elite class and it is used in a way to exploit the ruled class and provide benefits to the ruling class and their cronies. The rulers have invented strange techniques to prolong their rule in the name of democracy.
They, in order to secure points blame each other through media although none of them is sacred cows and they are product of scandals. The other way to befool people is that they have turned superior courts as their battle field to get their scandals decided through litigation on the cost of public money. They know that litigation will never end and by this way they would succeed to complete their tenure. They also propagate against marital law and army despite the fact they were grown up under the patronage of GHQ. What people should do to get rid of these false democrats? The best thing is that all old democratic leaders should say goodbye themselves to politics seeing their failure in their performance and for destroying the national institutions. The other way is that people should stand up to field candidates from amongst themselves who bear good character and are capable of running government for the betterment of masses. They should boycott all those candidates who purchase party tickets for contesting elections on payment of heavy amounts. If the people do not do it the same old corrupt rulers would come in power in the upcoming elections and masses will remain hostage to them. There would be no collective progress and whatever is left in form of half dead institutions would be completely wiped out.
MILLION DOLLAR DONATION
[Col. Riaz Jafri (Retd), Rawalpindi]
A news report says that a million dollar donation has been made to Ajmer Sharif (India) by the high commissioner of Pakistan in Delhi on behalf of the President Asif Ali Zardari and the People of Pakistan. May I know how much of this million dollars is the personal contribution of the President and how much of it is on behalf of the people? And, if the entire amount is to be paid by the tax payer under which rule the President is authorised to make such a donation on his own behalf and that on behalf of the people of Pakistan?
Firstly, I had thought of ignoring the matter as yet another one-of-those-things that our rulers keeps doing but then I realised that keeping quiet over such “philanthropies’ at the cost of the exchequer may encourage them further in squandering the hard earned foreign exchange of the nation already under heavy international debt. They must, therefore, be discouraged and made to realise that by doing so they not only transgress their authority but also that their such act is unbecoming the democratically elected rulers.
PUNJAB GOV EXTORTING MONEY
[Sher Gondal, Mandi Bahauddin]
Lifetime token fee for cars up to 1000cc and deposit of token fee with Excise and Taxation department has been rejected by the public. People belonging to lower middle class say small vehicles are purchased by people with low income. Previously yearly token fee was about four to five hundred rupees yearly for a vehicle up to 1000cc. Estimated life of vehicle is about 10 years. Under new scheme the token fee had been doubled in addition to making its payment with vehicle registration fee in lump sum. A person who purchased Mehran car 800cc by booking through dealers said that he had to pay registration and lifetime token fee as following (1) Registration fee Rs 15000 to 16000 (2) Income tax and professional tax Rs 1100 (3) Lifetime token fee plus token price Rs 10200 (4) Motor dealers take Rs 6000 for registration of vehicle on the plea that it is Suzuki Motors Company policy that registration of vehicle has to be done by the dealers. After purchase of 800cc car, one has to pay Rs 32000 to 33000 to bring the vehicle on road.
Keeping in view these figures, the new lifetime token fee is to burden the purchaser with unjustified heavy expenses. Besides this policy is not applicable to vehicles above 1000 cc that makes the lifetime token fee policy discriminatory. There is another aspect of the policy. In case the vehicle meets accident and destroyed, the owner of such vehicle would suffer loss of lifetime token fee he had paid. The same way if the vehicle is stolen, the thieves would enjoy its ride freely with out depositing token fee. Payment of token fee on yearly basis with GPO was most convenient to car owners. Now they would make several rounds of Vehicle Registration Authorities Office where the staff is allegedly ill reputed. Public is of the opinion that there was no flaw in the old policy but Punjab Government had replaced it with new policy to extort more money in form of lifetime token fee that was not acceptable to public. They urged Punjab Chief Minister to take notice of the matter and withdraw anti people lifetime token scheme at the earliest.
CARE TAKER PM
[Col. Riaz Jafri (Retd), Rawalpindi]
Kindly allow me to reproduce my following Letter to Editor written on 13 November 2007, the contents of which are very much applicable even today after 5 years:
QUOTE: The mere fact that we have to have a care taker government to conduct the polls speaks volumes about our national character and proves that we as a nation are not prepared to trust our fellow politicians? It is taken for granted that the incumbent government in power shall rig the polls to its own advantage and, therefore, it must be replaced by a ‘neutral’ government. Now, the comical irony is that every political party seems to have its own standards of neutrality for the person to head the care taker government. Different political parties have different people measuring up to their own specific standards. There are neutrals, more neutrals, less neutrals and not-neutrals depending upon their standing with a particular party. BB was reported to nominate Makhdoom Fahim as her most neutral and suitable person for the care taker Prime Minister-ship!! Ch. Shujaat Sahib has reportedly assumed the role of the Chief Examiner to scrut inise the credentials of the neutral aspirants for the job – of course according to his own standards of neutrality. In short the search is on to have an impartial and neutral care taker PM because all those belonging to ANY political party are assumed to be not trustworthy. What a shame we can’t find ONE honest, impartial, man of integrity from among the politicians who could enjoy the confidence and trust of the rest of the politicians to head the care taker government? Viva la democracy! UNQUOTE
AITZAZ AND ASMA’S ROLES
[Sher Gondal, Mandi Bahauddin]
Aitazaz Ahsen and Asma Jahangir when talk of democracy and pass on comments that Chief Justice sometimes oversteps his powers and his decisions are biased should take notice of the performance of Parliament that have ruined economy of the nation and brought the country on the verge of disintegration. They advise judiciary and government to find out some middle way to compromise. May I ask them if any principle is there that allows compromise on the point of administration of justice? Law is equally applicable to every citizen and the rulers are not exempted from it. All parties including their heads supported Ch Iftikhar when he defied the Military ruler all alone. Even Benazir Bhutto praised the Chief Justice for his courageous stand against a dictator. How it comes that all these lover s of democracy have changed their stance when the NRO was declared null and void and PM was asked to write letter to reopen money laundering case against Mr. Zardari. It is very clear to every member of the nation that Zardari is accused in money laundering case.
Under the law, administrative head of the state is bound to write letter to Swiss Authorities to reopen the case as asked by the SC. It is further clear that Zardari mafia is defying the orders of the Supreme Court where as on the other side in order to maintain check and balance as per constitution as well as holding law of the land supreme, Chief Justice is equally bound to act and initiate legal proceedings against the defiant. There is no other way to deal with this case. People stand behind the Chief Justice. On 15 Aug if the Chief Justice convict the incumbent PM on the charge of contempt of court he is national hero. If he is pressurized to pass on verdict as demanded by Zardari mafia it would be end of this government and some new force will emerge to control the situation and even in this the Chief Justice will be remembered as hero where as defiants will fall in the list of villains.
There is only one way to get the Zardari group out of the situation and that is holding of new elections immediately. About Ashen and Asma they are the type of courtiers and they can’t live with out the support of those who are in power. They, therefore have to speak language of their master for receiving rewards. What is their contribution towards Pakistanis and democracy? They are wealthy and representatives of exploitative forces whether these force are foreign or local. The examples of court rulings from foreign countries they give in support of their stance may be right but our set up is not at par with those countries. There is democracy where as in our country there is no democracy. Here elites rule the countries who are millionaires or the sons of sons of those who were the most obedient servants of British rulers. They don’t bother for the country or the common man and consider it their hereditary right to rule this pure land and its natives. They first launched a malicious propaganda campaign against Armed Forces and demoralized soldiers. Now they are after judiciary to clear all hurdles in their way to keep this nation slave and poor.
Issue of the month: Democracy with a vengeance
[Anjum Zaheer, Islamabad]
Can we please have electricity, water and some semblance of law and order instead of this vengeful democracy? [The News]
[Tahmina Ali, Islamabad]
Pakistan is fast becoming a failed state and there is no realisation of it by our leaders. I simply fail to understand why the MQM wants to have an All Parties Conference (APC) to safeguard the country. When all the issues are known and problems have been identified more than once through different forums, the idea of conducting another APC sounds ridiculous. It is tantamount to buying time and befooling people. It is time for action, for implementation, and for sound reasoning. Should one ask about the outcome of the previous APCs? What has happened to the resolutions passed in those conferences?
The PML-N and the PTI have taken the right decision not to meet the delegation of the MQM concerning the APC. What would the MQM discuss in the APC? Would it be about Balochistan, about loadshedding, about terrorism, about extortion and killings in Karachi, about corruption in the corridors of power, or about the Haqqani network? These issues have been discussed, debated and deliberated umpteen times in different conferences on which millions of the taxpayers’ money have been spent. It is rather a matter of shame for the MQM that after almost four and a half years in power, they have not been able to bring even a semblance of peace in Karachi. [The Nation]
ROGUES IN POLITICS
[Ali Malik, Lahore]
What Pakistan needs is good governance by relatively honest politicians who are committed to this country and have no split loyalties. As political morality, democratic norms and ethics have failed to gain foothold in working of our political parties, role of rogues and sycophants has become more prominent. Every political party has more than their share of such vagabonds, for whom politics is all about taking over power, resorting to its abuse and plundering national exchequer to better personal assets. Can somebody justify ethics of men whose personal life revolves around debauchery, yet they because of accident of birth were born in families whose great grandfathers were noble men, now financially exploit the illiterate masses who do not have enough to eat but offer these creeps their life-long savings expecting divine blessings in return. These gaddi-nasheens seek nazranas from criminals and white collared corrupt who think these offerings would launder their criminal earnings, reminding you of black magic fake alims. They make a mockery of faith and religion when they think that their ill-gotten wealth can buy divine blessings.
As if this was not enough we now have rogue sons of politicians, men like Dost Mohd Khosa or Hamza Shahbaz of PML(N), who seek public office on hereditary grounds but instead of being role models serve more as vagabonds, making a mockery of the institution of marriage and family values. Then, there is that bull in china shop son-in-law, who would not qualify for any job on merit but was made head of PML(N) Youth wing. The PPP has an endless list of such cronies ranging from Feisal Raza Abidi, Qayuum Jatoi, Musa Gillani, Qadir Gillani to Sharjeel Memon, Basra or Raja Riaz, who having piled assets beyond their wildest dreams now resort to foul mouthed language for judiciary and justify corruption as if it was a legitimate perk of power, reminding you of corrupt bureaucrats and generals. Even the PTI, headed by a man with some credibility is now surrounded by rogues and opportunists like Inamullah Niazi, Imran Usman, Khurshid Qasuri, Sardar Assef etc, most of whom were loyal poodles of either Musharraf, or even of AZ till they were refused lucrative posts. With such poor talent, no wonder political parties in Pakistan have fared no better than the corrupt khakis and bureaucrats who have abused this country for more than half a century without any shame or remorse. [Pakistan Today]
IS THIS DEMOCRACY?
[Malik Tariq Ali, Lahore]
In an interview on BBC’s Hard Talk, Barrister Aitzaz was asked “Is this Democracy?” while referring to hereditary element that dominates dynastic politics in Pakistan. The anchor questioned democratic credentials of this process where leadership of political parties like PPP are handed over like family assets to next of kin, as if this were a dynastic rule. Can anybody in UK or USA forecast who will be head of Conservative, Labor, Democratic or Republican Party five years from now? But in Pakistan we know who will lead either PPP, PML (N), ANP or JUI (F) etc even after ten years.
In a democracy the system itself creates new leadership, and the only constant factor is supremacy of laws and will of the people. When political leaders and parties assume role of a cult, with armed wings, leadership tends to seek divine immunity from laws and individual decisions prevail, instead of collective wisdom.
Barrister Aitzaz, a PPP loyalist, tried to defend this undemocratic political culture by justifying it as a regional problem quoting the example of Nehru family. Democracy is a system, where manifestos of political parties and their performance decide the choice of an individual to head a political party. Unfortunately one of the corollaries of dynastic politics is its domination by mediocrity, who consider themselves royalty instead of public servants. From Rajev Gandhi onwards the Nehru dynasty is dominated by people with split loyalties, a consequence of their being raised abroad, with preference to locate their assets in foreign countries, with whom they associate amidst scams of massive corruption. So acute is this crisis in Pakistan, that the PPP leadership was decided on basis of a political will. It is just not the PPP, but other parties such as ANP, PML(N), JUI(F), PML(Q), PML(F), MQM etc which are afflicted with this undemocratic cult like curse. As a consequence of this dynastic curse that afflicts our politics, instead of best qualified and experienced political workers, party leadership are dominated by mediocrity with no experience, skills nor maturity to benefit the people, improve economy, boost employment and restore writ of constitution in Pakistan. Instead in countries, where ruling political elite is dominated by dynasties, the state resembles more like fiefdoms instead of a democratic welfare state. [Pakistan Today]
UTTER INJUSTICE WITH PEOPLE
[Anwar ul Haque, Peshawar]
The PPP government has borrowed over 5000 billion rupees as loan. Most of these loans go in to the pockets of corrupt while people of Pakistan are made to pay this loan with compound interest in the form of devaluation of currency, taxes and rise in prices of electricity and gases, etc. This is utter injustice!
Every other day State Bank is issuing its grave concern over extremely pathetic condition of Pakistan economy! Even Sindhi Hindus are leaving Pakistan over law and order situation in Sindh. Its interesting that interior minister was given an honorary PhD degree on achieving peace! It has been proven beyond any shred of doubt that PPP is totally incapable of running the affairs of this country. Why people of Pakistan pay for their extreme dishonesty, incapability and their loans?
[The Frontier Post]
Edited and prepared by
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