Pakistan Power Sector Outlook: Appraisal of KESC in Post Privatization Period

Pakistan Power Sector Outlook: Appraisal of KESC in Post Privatization Period

Duration: September 2011 to July 2012

Team Members: Engineer Arshad H. Abasi, Fareeha mehmood

Introduction:   

The present energy crisis in Pakistan is worsening day by day due to increased reliance on costly oil imports, lack of proactive approach and ignorance about sustainable options in energy corridors of the country. High dependency on fossil fuel for electricity generation has drained the national exchequer and mounting import bill continues to exert pressure on the trade deficit and the foreign exchange reserves. The economic growth has suffered a serious setback coupled with substantial decrease in GDP, unemployment and civil distress hovering over the nation’s security like a disaster.

In purview of this burgeoning energy crisis and the need to revisit the policies and institutional framework, SDPI has recently launched a report titled “Pakistan Power Outlook: Appraisal of KESC in Post Privatization Period”. The report, while discussing KESC as a case study, not only analyzed the energy crisis but also gave solutions to the issue. It is worth mentioning that the report has been reviewed and endorsed by the top universities and academicians.

Objective:

The main objective of the study is to find the root cause and underlying factors behind the ongoing energy crisis and present solid, doable and practical solutions to the government so that the crisis could be overcome in a shortest possible time.

Recommendation:

The study narrates the history of KESC from its nationalization in 1952 to the arrival of Abraaj Capital in 2008. The performance of KESC in generation, transmission and distribution since 1947 to date has been compared with PEPCO, IPPs as well as international power plants to draw the attention of policy makers and the government for an immediate action to increase fuel efficiency, minimize auxiliary consumption and reduce transmission and distribution losses. The statistics in the report depict a deteriorating image of the company in terms of transmission and distribution losses and consequently the financial health of the company.

Moreover, the untargeted subsidy allocation towards KESC, exacerbating the intricacies, has also been discussed in detail.

The findings and recommendations of the report are equally applicable to all thermal power plants of the country, which are generating 70% of the electricity within the country.  The findings suggest that enhancement in fuel efficiency (generation per unit of fuel) would not only help generate more electricity from the available fuel (increased supply of electricity), but also reduce prices of electricity by bringing down the cost of generation (at cheaper rate). At the same time, fuel efficiency would result in saving the scarce fiscal resources the government spends on subsidizing the power sector.

In addition to the improvement in fuel efficiency the report also drew the attention towards the immense hydro power potential available in Pakistan but only 10% of indentified potential of 60,312MW has so far been utilized.