The captive power plants (CPP) of influential business groups, which have emerged as a parallel power sector over the decades, while benefiting only a limited number of industries at the cost of load shedding to the entire nation, is now posing a threat to the entire power sector if its unabated natural gas supplies are not immediately stopped.
A study carried out by Planning Commission on the gas allocation and its impact on the power sector available with the Pakistan Today notes with concern that CPPs are currently estimated to be using 1.2 billion cubic feet gas per day (bcfd) out of which 250 million cubic feet gas per day (mmcfd) alone is allocated to plants in Karachi, which is higher than Karachi Electricity Supply Company (KESC) supply of 153 mmcfd.
For immediate solution to the power crisis, the study recommends diverting 800 mmcfd from CPPs to Independent Power Plants (IPPs), which will increase generation by 3350 MW. It will help in a savings of $ 5.2 billion. Highlighting that presence of CPP only benefits a few industries while resulting in load shedding for the entire nation, it stresses gas allocation on rational basis as it is a scarce commodity. It says gas consumption in the compressed natural gas (CNG) sector has increased by 363 percent from fiscal year 2004-05 to fiscal year 2010-11, due to its being 33 percent cheaper than petrol and high speed diesel. Diverting 310 mmcfd from CNG will increase power generation by 1300 MW. It will also result in a saving of $ 2 billion on account of low furnace oil consumption.
Both these steps will help reduce the load shedding by 80 percent as by a simple decision power generation will increase by 4,600 MW and enhance economic growth. It will also end the circular debt as the power tariff differential subsidy (TDS) will be completely eliminated. It will also allow retaining the fiscal deficit close to the budgetary target.
To avoid controversy on the facts, the study is compiled on the basis of the published government data upto end fiscal year 2010-11. Power crisis is one of the major reasons for massive decline in investment which have fallen from 23 percent of GDP in fiscal year 2006-07 to 13 percent in fiscal year 2010-11. It says TDS has increased 51 percent per annum over the last 5 years. TDS alone contributed to 30 percent in the fiscal deficit last fiscal year.
The misallocation of natural gas has intensified the power crisis, points out the study stressing efficient allocation of scarce resource. It says gas allocation policy was blatantly violated since 2005, as general industry fourth in the allocation list were the largest beneficiaries. The gas allocation to industries increased by 34 percent or 766 mmcfd and CNG sector by 363 percent or 310 mmcfd over the same period. While the power third on the priority list, after domestic and commercial consumers, was the major loser since 2005 when its gas allocation decreased from 44 percent or 1.3 bcfd in FY 2005 to 27 percent or 924 mmcfd in FY11.
