The Karachi Electric Supply Corporation (KESC) received higher subsidy than other power Distributions Companies in FY 2010-11, and received approximately Rs 6 per unit (kilowatt hour KWh) as fuel adjustment compared with the national average of PKR.1.5 per unit. The total subsidy amount paid to the company was Rs 47.317 billion (USD 551 million).
These appalling figures have been quoted in the study report “Pakistan Power Sector Outlook: Appraisal of KESC in Post Privatization Period,” which was released last week. Conducted by Sustainable Development Policy Institute (SDPI) Advisor and energy sector expert Arshad Abbasi, the study highlights the fact that there is an abnormally high consumption of fuel to generate one unit of electricity and the demand is being met by using furnace oil for electricity generation.
Based on the case study of one organization, the study is reflective of the whole energy sector of the country where efficiency and productivity have never been the priorities of those who matter. Unfortunately, it reveals, the efficiency of a particular plant is not taken into account by National Electric Power Regulatory Authority (NEPRA) while receiving tariff petitions. The rates are decided on the basis of cost of production which disastrous.
Explaining his point, the author states KESC takes 11 to 18 cubic feet of gas to generate one KWh of electricity whereas plants of other companies such as Uch Power, Saif Power and Orient Power take only 7.37, 7.47 and 7.56 cubic feet of gas respectively for generating the same quantity of power.
TNS talked to Abbasi who shared that as per global standards, 10 kg to 12 kg of furnace oil is required to produce 100 units of electricity. In Pakistan, the figure even gets around 30 kg per hundred units. Instead of asking the producers to improve efficiency the differential is paid by the government in the form of subsidy and the cost passed on to consumers in the form of fuel adjustment charges.
To sensitise the masses and policy makers on the issue, Abbasi presents tables which show the total budget for Science & Technology Research Division, Environment Protection, Housing and Community Amenities, Health Affairs & Services, Education Affairs and Services and Social Protection was Rs 46.649 billion for the fiscal year, which is less the subsidy paid to KESC. Nationwide, the amount paid to power producers under subsidy stands around Rs 1600 billion.
He simply challenges the total subsidy paid to KESC which according to his findings is less than 338 percent of allocation to Higher Education Commission (HEC) and 169 percent less than the fund allocated to Special Areas (Azad Jammu & Kashmir, Gilgit-Baltistan and FATA) declared as least-developed areas Pakistan in federal budget 2011-12.
His point is that the purpose behind privatizing KESC is not fulfilled and the company is permanently on crutches. The company’s claims that it has improved its generation efficiency from 33.07 per cent to 33.5 per cent over the over by replacing old Korangi and site gas turbines by new gas engines is also challenged in the study.
The study mentions the newest arrival in KESC’s generation units- Bin Qasim II Plant- is less efficient than the earlier ones. It mentions the heat-rate of Bin Qasim II is 12,163 Btu/Kwh commissioned in 2012 which is even higher than Korangi and SITE GTPS II having heat rate of 9500Btu/Kwh and commissioned in 2009. Ideally the figure should be 5800Btu/Kwh and the larger it is the efficient is the plant.
The good thing about the study, as highlighted by energy sector, experts is that the performance of KESC in generation, transmission and distribution since 1947 to up to date has not only been compared with PEPCO and IPPs but also benchmarked with international power plants. “This benchmarking draws the attention of the policy makers to give immediate attention to the fuel efficiency, minimizing auxiliary consumption and reducing the transmission and distribution losses.”
The study also advises KESC to adopt Advance Metering System but with a caution, to implement this project in stages, starting from high loss areas, particularly where three-phase domestic and commercial meters are installed and use of air conditioners is in abundance. Other high loss areas may be those where small industrial units or vendor units are located. Power supply through Kundi system may be a small percentage of total theft in its poor people localities and may be dealt with at later stage.
Last but not the least, the study suggests, without saying anything, that heavy subsidy paid to IPPS and KESC may be the most sophisticated and carefully designed case of unprecedented corruption in the history of Pakistan. It’s quite likely that the fuel consumption figures in some cases were inflated artificially to claim high amounts in subsidies.
No doubt, the study leads to some questions which will have to be answered ultimately. A few of them follow:
Why was the performance standard for electricity generation not incorporated in ‘power generation standard’?
Why was the technical Audit of IPPs and KESC not conducted, causing provision of heavy subsidy and ruining the national economy?
KESC is submitting regularly heat-rate of all power plants, which are abnormally high. For example, new installed Bin-Qasim-II is so-called state of the art plant but its heat-rate is 12,163 Btu/KWh as against 5800 Btu/KWh but ignored or unchecked by NEPRA officials. Why?
NEPRA is continuously allowing KESC to enhance tariff, without checking fuel consumption of power plants? Why is it so?
This article was originally published at: The News
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.