Pakistan is in danger of facing a grave level of food insecurity due to water shortage
Amidst the existential war against terrorism our more lingering, deeper, and equally threatening problems go undetected and undebated. Despite promises, successive governments have failed to get a handle on the energy crisis. Gas, our never ending supply source, was not so unlimited after all. And few people really understand the nightmare relating to acute water shortage that is just around the corner.
All these factors affect the human development index, not to mention the economy. And with a suffering economy and a deteriorating work force, urgent problems like a war of survival, too, are bound to worsen. To help understand the situation, DNA talked exclusively with Arshad H Abbasi, one of Pakistan’s leading energy experts.
Question: What is our prime source of energy and why has there been confusion about how much natural gas Pakistan produces?
Arshad Abbasi: Gas contribution has been 48-50 per cent of energy, which is being burned in the industry and households. We have not been able to plan and develop the hydel power sector. It has remained our failure that instead of developing the most economical power source our focus shifted to furnace oil. It is important to mention that during the last 60 years we have been not been able to diagnose the energy problem. It is a big issue as diagnosis will lead to a solution.
Over the years it was fed to the rulers and people that Pakistan has enormous natural gas reserves which will last for an unlimited period of time. This philosophy prevailed till 2004; it was self deceptive that gas is available forever. In 2004, the managing director of Sui Northern Gas Pipeline Limited stated that Pir Koh gas field has unlimited gas reserves to meet our requirements for 300 years.
With such statements from industry leaders, we were naturally heading towards a crisis. Then in 2005 suddenly we were told that gas reserves have depleted. In the last 10 years we have not done any productive planning. Sometimes we look to coal and then to LNG. But these are just day-to-day matters. There is no long-term plan.
Q: Why is our energy mix critised as not being efficient?
AA: As we had no planning, instead of developing the hydel power we shifted to furnace oil. PPIB succeed in thermal power plants but it was a success story all over the world. Furnace oil was Rs22000 to 25000 per metric ton till 2003-04 and suddenly there was a jump in oil prices. We thought of shifting the power plants to natural gas but there was no gas. The same medicine was being applied for all diseases without bothering for a diagnosis. With the furnace oil prices rising to Rs70,000 per ton the power tariff was bound to increase. Then the subsidy issue was never addressed which, again, was bound to halt the economy. There was a Rs3.5 per unit differential in the applied tariff and generation cost.
The government gave Rs1900 billion subsidy from 2006 onwards. The cost of generation of electricity had been increasing and it is the mother of all energy issues in Pakistan. Yet instead of exploring new resources of energy, the government focused more on gas. The viable option was energy efficiency. But the bureaucracy advised the government in favour of natural gas as energy efficiency required more effort.
It is important to mention that the Power Purchase Agreements, signed by the government with investors have no energy efficiency conditions. Even the word energy efficiency is missing from official documents. The inclusion of energy efficiency would have helped address the challenge of climate change. For the last two decades we have used the force of fuel for energy, ignoring energy efficiency. The thrust should have been on modern technological advancement – fuel efficiency to reduce the carbon emissions. The efficiency drive was being pushed by the UN. Pakistan was signatory to Kyoto Protocol and could have utilised carbon credits for energy efficiency, but there was no planning so we failed to move in the right direction. We are still looking towards high energy generation cost projects like solar, which will maintain the higher cost of energy basket. The fundamental role should have been to reduce the cost of power generation. The high cost of generation resulted in recovery issues
Q: How do we stand in comparison with other countries?
AA: If you look at global figures the energy efficiency of power plants is at least 60 per cent. In India six cubic feet of gas make one unit of power, while most efficient power plants in Pakistan take 8-14 cubic foot to produce one unit of electricity. The most efficient power plant, Bin Qasim-II Karachi, consumes nine cubic feet of gas to produce one unit. While the same GE machine in Ahmedabad takes only six cft to produce one unit. Nobody in the government has bothered to ask the ministry of water and power or NEPRA to explain this issue. There is no power plant in Pakistan whose efficiency is more than 40 per cent. Furnace oil prices dropped 50 per cent so the power prices should have also seen a cut of 50 per cent.
Our furnace oil plants use 40kg to produce 100 units. This will keep the electricity prices high. We have a derated capacity of 22,000 MW but we cannot generate it at the optimal level. We are told that we don’t have capacity to transmit more than 14,000 MW. That is not correct. We transmitted 16,000MW just two years ago. Power generation is declining but the government has no answers, neither has it bothered to do an analysis.
Q: Why have we failed to keep up power generation?
AA: In the Eighties, the global power market landscape changed and the purpose of regulation became protecting consumers. In 1997, at a time when 25 per cent extra electricity was available to export, share of cheap hydroelectricity was more than 50 per cent, Pakistan had the chance to follow UK’s example when NEPRA emerged with an 18-page Act mandated to issue licenses for power generation, distribution and transmission. At the same time, it had to ensure provision of consistent electricity at affordable rates and create a level playing field for power companies.
The cost of generation of electricity had been increasing and it is the mother of all energy issues in Pakistan. Yet instead of exploring new resources of energy, the government focused more on gas
During the last decade, globally regulators have made dramatic changes in regulations. The transformations, including technological advances and increasing renewable energy share, increasing efficiency for cost reductions, and climate change concerns, are incorporated to ensure sustainable economic development by supplying electricity at affordable rates. One of the key roles of regulators is energy audit, to ensure minimum use of fuel to generate single unit of electricity.
The NEPRA Act was also amended three times, when amendments related to the qualification of the chairperson were made to the original legislation. The impetus for these amendments gathered momentum when a bureaucrat with substantial influence and clout exerted himself in his last days of service to realise his desire of taking the reins of NEPRA in 2008. This was at a time when the power sector was already being crippled. Within a few years, the gap between supply and demand widened to accommodate provisions for only one-third of the total demand, leaving the economy in tatters. After his departure, the Act was again changed to accommodate another crony, who looked after the interests of the ruling regime for years. Such needless changes through amendments provide ample evidence of the rampant nepotism that has plagued NEPRA through the decades.
Q: How else is NEPRA failing in its duties?
AA: A close look at the core functions of NEPRA, namely issuing licenses, enforcing standards for quality, determining tariffs for generation, transmission and distribution of electric power, serves as an index to NEPRA’s performance. Issuing licensees through pre-formatted proformas exposes their capabilities. Transparent tariff termination depends on a breakdown of EPC (engineering procurement construction) cost, wherein due diligence is essential. Regional markets show that tariffs in all forms of energy granted with an abnormally-inflated rate are reflective of ‘the power’ of proponents.
In fact, the ultimate victim of the stagnant nature of the NEPRA Act is Pakistan’s power sector itself. Energy efficiency is one of the cherished mantras of the modern world, but it seems that it is one which has escaped the attention of NEPRA. If NEPRA had concentrated on improving the heat-rate (measure of efficiency) of its thermal power generation plants, it would have been able to avoid the payment of PKR1,900 billion subsidies. This amount, if effectively used for hydropower development, would relieve Pakistan of its grave energy crisis. Low efficiency and high carbon emissions through coal power generation mark NEPRA as prominently against the preservation of the environment. This should be alarming for all actors aiming to curb climate change.
Another catastrophic blunder of NEPRA is the negligible enforcement of Section 37 of the Act in which NEPRA was responsible for the review of public sector projects. However, NEPRA has failed in its mandate by ignoring hydropower projects of power policy 2002. There were 22 projects, having a capacity of 8,100 MW scheduled for completion in 2012. Yet, over this period of 13 years, only seven per cent progress has been made. If these had been completed on target, the Rs1900 billion subsidy accrued could have been saved.
The NEPRA Act had also developed performance standards for safe and reliable supply of electric power and embedded the strictest penalties in case of non-compliance. However, voltage fluctuation has remained a major issue in Pakistan, causing short-circuiting and leading to the deaths of 289 workers in a garment factory and more recently to the timber market incidents in Karachi and Lahore Anarkali. Yet, the culprits remain unpunished by NEPRA.
The main cause of fire was short-circuiting due to voltage fluctuations. The question here arises whether NEPRA is going to penalise the distribution companies responsible for these incidents. Furthermore, the performance standards used by NEPRA are nothing but a duplicate of India’s power sector standards, showing NEPRA’s level of competency.
Furthermore, privatisation of KESC has not been as beneficial as was originally envisioned as endemic load shedding in Karachi has still not been removed. According to section 28 of the Act, NEPRA should take action against KESC and remove the existing inefficiency, however, except for imposing a fine of PKR200,000, the regulatory body has taken no other measures. I feel that if the authority appointed a competent administrator, as allowed under section 28(2) c, the consumers of Karachi would face immense relief.
NEPRA, as a regulatory body, is nothing but a repository for the statues of cronies and retired bureaucrats. However, there is one vital difference between the statues of NEPRA and the statues at Madame Tussaud’s. The waxworks at the museum at least generate significant annual revenue. On the other hand, NEPRA is a parasite, spending money on hearings held in luxurious five-star hotels, so much so that NEPRA has helped, inadvertently, to effectively prop up the hotel industry in ailing economy.
Q: How do you rate the ruling party’s performance on the energy matter?
AA: This eccentric ruling family is using the country’s whole force and economy to develop metro bus service BRT (bus rapid transit) in Punjab. In its first magical show, Rs30 billion were spent on Lahore’s BRT with a 27km route, completed just before the 2013 elections. This metro proved to be a white elephant when annual subsidy touched the figure of Rs3 billion.
Before the elections, PML-N used the prevailing energy crisis as a chip to win. After elections, a fresh list of power project was made as an excuse to beg for funding from international donors. However, that was not enough. At same time, a special budget of Rs50 billion was reserved for another BRT project in the twin cities. The project started without any due-diligence of cost and design. Despite this fact, the interest of ruling family was amazing as they worked 24/7. As the shop-drawings were in the making, the excavation work was almost completed. If the ruling family had taken equal interest in the energy sector, which is the engine of the economy, half of the Metro Bus amount could have been used for the rehabilitation of thermal power plants. This could increase their efficiency, so that the same amount of fuel could lead to double the power generation.
However, if we look at the progress of our neighbours, 55 kilometres Ahmedabad BRT was completed in the Indian state of Gujarat by Modi, who at that time was the chief minister. The Ahmedabad BRT was able to win global awards, including one from Secretary General UN, in best design and 100 per cent transparency. On the other hand, the Islamabad metro (BRT) is executed under heavy curtains and no one can dare ask about the cost and design of the project.
Q: How has the lack of dams worsened the situation?
AA: Let me give you an example. The already dilapidated economy took another serious blow when the disastrous floods of 2014, in the second largest river Chenab, caused more than Rs200 billion in damages. The heavy floods badly affected more than 1,500 villages, including 350 villages of Multan. One of the major reasons behind the floods was the persistent ignorance of Chiniot Dam on Chenab River. The 1.3 million acre-feet storage, with a 60 MW hydroelectricity facility, was first proposed in 1959 in London by Mr Haigh, a former Chief Engineer of the Irrigation Department. In 2009, a member of WAPDA, who later became chairman, sent a project proposal with cost of Rs24 billion and annual benefit of Rs5 billion. The file, so far, has failed to draw the attention of our premier.
This eccentric ruling family is using the country’s whole force and economy to develop metro bus service BRT (bus rapid transit) in Punjab
The building of dams, including Chiniot, has been deferred at a time when Pakistan has entered a phase of acute water scarcity. Per capita water availability is dwindling with every passing day, placing Pakistan’s food security at risk. The per capita water availability has dropped by over 420 per cent since 1951 to 990 cubic meters per person in 2014. The country’s water storage capacity is another bleak story. Water is just available for 25 days, whereas the neighbouring country, India, has the ability to store water for a staggering 120 days. The agricultural sector’s contribution to gross domestic product (GDP) has lowered by 21.8 per cent.
The population of Pakistan is expected to swell to 265 million in the coming 15 years, dictating the need for more cereal and food. A dam would be just what the country needs for storage of water for additional land for cultivation. Currently, out of 197million acres (MA), only 52 million acres of land is cultivated due to shortage of water, showing how underutilised our land is. Thus, Pakistan is in danger of facing a grave level of food insecurity due to water shortage. This is apparent from the fact that the 2012 Global Hunger Index (GHI) placed Pakistan very high. The case of Tharparkar further represents the dire food insecurity that exists in Pakistan where approximately 82 per cent of the total households have food stocks that are not even sufficient for 15 days. The water and food security issues can only be addressed if the capacity to regulate the water is increased through the development of additional reservoirs, particularly when the largest dam Tarbela is expected to be half filled in the next ten years.
Unaccounted for gas is 20 per cent due to transmission losses. The government has failed to address the issue during the last two years. We haven’t shifted power generation on low BTU reserves. We can utilise our low BTU reserves for power generation. They are not on the priority list of the government. The biogas option has not been used. Pakistan has potential being the 8th biggest producer of cattle. India is using biogas for LPG and CNG. We were supplied with Rs44 billion worth of water in petroleum during the last few years. The ministry of petroleum did not bother to investigate the issue. The petroleum minister went for LNG as if it was the panacea for all energy issues.
Q: How do you see CPEC? What does it offer Pakistan?
AA: Soon after taking oath, Indian premier Modi went to Japan and got a takeaway package of US$ 35 billion. A dedicated cell was established in India called Japan-plus special cell. According to the agreement, Japan would provide energy mix to India under which the prices would be kept low.
The Chinese offered us a package to match the Japanese offer to India. But what have we offered? Instead of Japan-plus, which includes four members from India and 2 members from Japan, we have established a delivery unit. India has disbanded the planning commission and established Japan-plus to actually move things forward. We also need such an approach to tap the opportunity.
We cannot take our CPEC transit trade to Suez Canal or even Panama Canal level in the next 100 years. The Suez Canal hasn’t brought prosperity to Egypt. We can get prosperity if we undertake economic reforms due to the Chinese imports and the transit facility. The planning for CPEC is faulty as we have only two hydropower projects – Suki Kinari and Karot Power. If the Chinese are coming as Engineer Procurement Contractors (EPC), then I think we have to set up a vigilance cell of professionals who can keep a very close eye on cost escalation.
One Belt one road is not a new project – we have already KKH since 1979. We were connected to China even before civilisation, when first drop of water emerged from Lake Manasarovar, Tibet, from where the River Indus generates.
Q: How do you see the two-year performance of the present government?
AA: We have got a petroleum minister who has acted as a manager for Qatari gas companies. He has failed to give a shale gas policy. According to the minister TTP and Raw, plastic bottles and beggars and media are highlighting the energy crisis. In identification of this new potential threat, he had to identify the petrol crisis as a big attack on Pakistan’s sovereignty. The ministry failed to even publish the year book 2103.
We have a buzz world, the key performance indicators (KPIs) of the ministries of water and power and petroleum have not been floated for the last two years.
Another big failure is that even organisations like FIA failed to check theft of electricity and gas and did not gave a substantial result. In terms of line losses, they failed to intervene and for the past two years reduction of line losses is almost negligible.
Amer Sial also contributed to this interview.
