Energy crisis in Pakistan might end soon, says Wall Street Journal

[marbella]

Thank You Nawaz Sharif to make it happen.

 

[VCheng]

When did it reach 650 billion rupees? It was only 320 or so billion rupees till last month's report of planning commission?

http://www.brecorder.com/articles-a-letters/187/115109/

"First, transmission and distribution losses have apparently been reduced to 17.9% in 2015-16. According to the Pakistan Economic Survey, these losses were actually lower in 2014-15 at 16.2%. Billing losses may have come down somewhat, but it is unacceptable that arrears in recovery have exceeded 50% of the annual billing in many Discos.

Second, the claim is made that the circular debt has been capped at Rs 348 billion. This is in conflict with the statement by the IMF that it has reached 2% of GDP, over 600 billion. The Fund has emphasized on the need to reduce this debt, possibly by receipts from privatisation within the sector. Otherwise, the liquidity position of the sector may worsen and create bottlenecks. For example, receivables of PSO have reached Rs 252 billion and are beginning to impair its ability to finance imports of fuel, as happened in early 2015.

Third, the tariff differential subsidy has been reduced from Rs 350 billion in 2012-13 to Rs 171 billion in 2015-16. This has certainly reduced the pressure on budget. However, this has been achieved more by a large increase in power tariffs of over 30% on average than through efficiency gains. This tariff increase was a prior condition for funding to start from IMF in September 2013."

By the way, I have already given my point that we are heading in right direction and the problem will not go away overnight.

Yes, I agree with you that the power sector is on the right track, but it is chasing a moving goal that it cannot catch for the foreseeable future.

 

[Cyberian]

Prime Minister Nawaz Sharif Zindabad.
What a great leader of the Islamic Republic he has turned out to be.

On the other hand, Pakistan's meglomaniac tyrants such as Muhammad Ayub Khan, Zia-ul-Haq and Pervez Musharraf could not each increase the electricity generation in the country by only 10 Gigawatts each despite the three dollarised American Poodles ruled the country for nearly thirty years. Three decades they wasted and ruined the nation.

 

[VCheng]

@Zaki People interested in a serious discussion on this topic should pay attention to the following report, and the excerpt below:


https://www.wilsoncenter.org/sites/...tan's Interminable Energy Crisis rpt_0629.pdf

The stakes have never been higher. Demand for energy will rise dramatically
in the coming years, and if the crisis is not overcome soon,
Pakistan could face unprecedented shortages. A quick glance at the data
provided in this book captures the seriousness of all this.

Back in 1947, Pakistan’s total power generation capacity was 60 MW.
Today, installed electricity capacity is about 23,000 MW—though actual
production stands at just 12,000 MW. Malik, in his essay, describes how
the government added 2,000 MW over a year-long period—though
only about 1,500 MW of it is online.

Over a period stretching from 2014 into 2015, peak demand was
20,800 MW—and this figure is expected to rise to nearly 32,000 MW
by 2019. In effect, in just a few years, national demand will exceed,
by nearly 10,000 MW, current installed capacity (the gap is even larger
when taking into account actual production). According to Ali’s essay,
Pakistan may need to install as much electrical capacity in the current
decade as it did over the last 60 years. And yet beyond the current decade,
meeting demand will grow even more difficult. Energy demand
will nearly double in the next 10 years, Ali projects, and it will quadruple
in the next 20. This all suggests that Pakistan will be placing
tremendous amounts of hope in that $35 billion in energy investments
pledged by China in April 2015—and the 17,000 MW of new generation
capacity that the investments are supposed to produce. And yet,
especially at this early point, there is no guarantee that these investments
will produce their expected outcomes—despite the assurances given by
Chinese and Pakistani officialdom. Additionally, as this volume repeatedly
makes clear, supply increases alone will not solve energy problems.

In effect, if Pakistan does not move with alacrity to address its energy
woes, the challenges that the crisis presents today will seem insignificant
compared to what could be in store for the country in the years ahead.

 

[CriticalThought]

Masha Allah. Alhamdulillah.

I must say, although I hate how NS has made us a target of international ridicule, what he's done for the power sector in the country is highly commendable. DEFINITELY, PML (N) is better than PPP. But, unfortunately, our elections are not based on merit and principles. To much provincial, selfish outlook in the common people. And then there are the impoverished poor who are economically blackmailed into voting for the same party over and over again.

The way our leaders are allowed to come and go out of 'exiles' is highly shameful. There must be no room for corruption and anyone who has been involved in corruption in the past should simply be barred from election.

P.S.: Sorry for the off-topic rant. But our independence in power and many other sectors goes hand in hand with corruption.

 

[I S I]

Pakistan Zindabad.

 

[DJ_Viper]

Energy crisis in Pakistan might end soon, says Wall Street Journal
Last Updated On 19 December,2016 09:21 pm

Wall Street Journal says over 10,000 mega watts will be added to national grid during next one year
ISLAMABAD: (Dunya News) – Wall Street Journal (WSJ) has on Monday admitted that the energy crisis in Pakistan is probably going to end soon as 10,000 mega watts of electricity are expected to be added to the national grid next year, reported Dunya News.

The American journal says that Prime Minister (PM) Nawaz Sharif might emerge victorious once again if the energy crisis gets resolved. It goes on to say that there are over 10 mega projects that might bring the crisis to an end upon completion.

The journal further states that when Nawaz Sharif took over power in 2013, there was around 12-hour daily load shedding in the country and has since seen a sharp decline.

The report also discusses China’s investment in Pakistan. According to WSJ, China believes Pakistan’s economic stability to be the guarantee of stability in the region.

There has been a lot of interest generated by massive economic power houses about investing in Pakistan, its potential and the best market returns. The Bloomberg's, Morgan Stanley's, Goldman, all are advising their clients about investing in Pakistan. Due to that, there has been many seminars and stuff. There was one in Texas too a few weeks ago that I went to.

A couple of speakers from Bloomberg (economic advisors) threw speeches at that event. Both highlighted this work being done in Pakistan to end the power outages. It was also said that in the history of human kind, no country has produced or added 10,000 MW worth of electricity in one year, or ten power plants. So this is truly history being made, and a historical record that no one's done this before. Credit goes to the current government.

Every time you bring in business minded leadership, they do their thing and they are much better for average people. Mr. Trump is about to do that too for people in the US. Our economy is going through the roof in the next few months.

Shame NS will get credit for ending our energy crisis. Ultimately propelling him to win the next election.

Sir, who else should get the credit if you won't give it to the premier who made this his theme and a bet for his future in politics, as I understand the article? If you really don't want to give it where it deserves, I am here, allow me to have the credit. When do I get a fat check and a thank you letter for fixing the electric issues in Pakistan? I always like to help people

 

[Signalian]

I am politically neutral but need to give credit where it is due. NS not only talks the right things but does the right things. However we need to ensure that his power is contained and constrained in the the interests of Pakistan.

NS could have done this when he was elected in 2013 but he kept it as a trump card for re-election. You need to look deeper in things.

 

[Finer]

There is the reason why loan money is invested on the energy sector to eradicate the energy crisis once and for all. People complained about the loan amounting to billion dollars increased drastically, but they lacked foresight since investment on energy sector will put Pakistan on the global map thus multiplying the revenue 25 times more than Pakistan is due for loan with interest rate, not to mention stabilizing the economy will only improve the fund for health and education department along with the budget for Pakistan army. Everything is connected to the energy sector, and that's why the energy sector is the top priority.

People will complain and moan about increasing loans, but that loan money will prove useful for Pakistan in the long run. Only if Imranistan understood the rewards of energy sector that has to offer. And i hope Pakistan army also cooperate with the democracy and its current democratic elected party PMLN for the sake of bigger picture ahead.

 

[Hyde]

http://www.brecorder.com/articles-a-letters/187/115109/

"First, transmission and distribution losses have apparently been reduced to 17.9% in 2015-16. According to the Pakistan Economic Survey, these losses were actually lower in 2014-15 at 16.2%. Billing losses may have come down somewhat, but it is unacceptable that arrears in recovery have exceeded 50% of the annual billing in many Discos.

Second, the claim is made that the circular debt has been capped at Rs 348 billion. This is in conflict with the statement by the IMF that it has reached 2% of GDP, over 600 billion. The Fund has emphasized on the need to reduce this debt, possibly by receipts from privatisation within the sector. Otherwise, the liquidity position of the sector may worsen and create bottlenecks. For example, receivables of PSO have reached Rs 252 billion and are beginning to impair its ability to finance imports of fuel, as happened in early 2015.

Third, the tariff differential subsidy has been reduced from Rs 350 billion in 2012-13 to Rs 171 billion in 2015-16. This has certainly reduced the pressure on budget. However, this has been achieved more by a large increase in power tariffs of over 30% on average than through efficiency gains. This tariff increase was a prior condition for funding to start from IMF in September 2013."

Sir our journalists are amazing people and do not have consistency in news reporting so you will find contradicting reports of circular debt due to lack of detailed research. It is also not beyond wisdom to imagine that they can also personal vendetta and express their grudge through news reporting (for example supporter of PTI maligning the performance of Noon and journalist affiliated with PML-N maligning PTI). In order to present my point of view, I will have to highlight something that you probably are aware as you follow energy news of Pakistan more frequently than myself.

Pakistan was piling up circular debt each year and incurred loss of about 300 billion rupees in 2012-13 alone before the new government took over in 2013. The circular debt stood at about 800 billion rupees in 2013 and the oil companies were protesting due to non-payment of dues by the government. The IMF was calling Pakistan on the verge of getting defaulted if you remember and the economic activities were at the lowest since decades. The first step that the government took in energy sector is to transfer about 340 billion rupees of debt into newly formed company called PHCL and decided to clear rest of the debt from the budget. That is about 480 billion rupees cleared off by the government in 2013. That is on top of of the money owned by PHCL which is technically part of circular debt but no longer taken into account due to transfer of dues into different books to show better position of the energy sector, that was also important to secure loan from IMF.

Since the loss making machine of energy sector of Pakistan had not come to halt, it kept on piling fresh circular debt soon after it was cleared and within 1 year it was reported that Pakistan had already accumulated circular debt of another 200? billion rupees which was technically lower than last year due to lower oil prices but still something to worry about. There were certain improvements made in 2014-15 but the debt continued piling up to about 330 billion rupees by 2015. Our newspaper have been reporting circular debt in both ways, whether to account the money owned by PHCL or whether to follow government's way of calculating by ignoring PHCL. So you will read contradictory reports about circular debt of Pakistan. One such example is this news report from 2015 which tells the circular debt being almost same as by end of 2016 (last week).

http://www.dawn.com/news/1181578

So technically the circular debt has not risen significantly since last year due to the facts I have already mentioned in earlier posts. The IMF also acknowledges the similar facts with their interpretation in this slightly old report on page number 17

https://www.imf.org/external/pubs/ft/scr/2016/cr1601.pdf

and in the latest report they do acknowledge that the circular debt is similar to back in 2015 due to improvement in line losses, increased recovery of bills and generation of electricity from more efficient plants etc. The bottom line is, if you do not take into account the liabilities of PHCL, The circular debt has piled up to 330 or so billion rupees since 2013 with 90% liabilities pending since 2015. The situation is improving and likely to resolve in the next 3-4 years

Thank you

 

[Hyde]

Sir our journalists are amazing people and do not have consistency in news reporting so you will find contradicting reports of circular debt due to lack of detailed research. It is also not beyond wisdom to imagine that they can also personal vendetta and express their grudge through news reporting (for example supporter of PTI maligning the performance of Noon and journalist affiliated with PML-N maligning PTI). In order to present my point of view, I will have to highlight something that you probably are aware as you follow energy news of Pakistan more frequently than myself.

Pakistan was piling up circular debt each year and incurred loss of about 300 billion rupees in 2012-13 alone before the new government took over in 2013. The circular debt stood at about 800 billion rupees in 2013 and the oil companies were protesting due to non-payment of dues by the government. The IMF was calling Pakistan on the verge of getting defaulted if you remember and the economic activities were at the lowest since decades. The first step that the government took in energy sector is to transfer about 340 billion rupees of debt into newly formed company called PHCL and decided to clear rest of the debt from the budget. That is about 480 billion rupees cleared off by the government in 2013. That is on top of of the money owned by PHCL which is technically part of circular debt but no longer taken into account due to transfer of dues into different books to show better position of the energy sector, that was also important to secure loan from IMF.

Since the loss making machine of energy sector of Pakistan had not come to halt, it kept on piling fresh circular debt soon after it was cleared and within 1 year it was reported that Pakistan had already accumulated circular debt of another 200? billion rupees which was technically lower than last year due to lower oil prices but still something to worry about. There were certain improvements made in 2014-15 but the debt continued piling up to about 330 billion rupees by 2015. Our newspaper have been reporting circular debt in both ways, whether to account the money owned by PHCL or whether to follow government's way of calculating by ignoring PHCL. So you will read contradictory reports about circular debt of Pakistan. One such example is this news report from 2015 which tells the circular debt being almost same as by end of 2016 (last week).

http://www.dawn.com/news/1181578

So technically the circular debt has not risen significantly since last year due to the facts I have already mentioned in earlier posts. The IMF also acknowledges the similar facts with their interpretation in this slightly old report on page number 17

https://www.imf.org/external/pubs/ft/scr/2016/cr1601.pdf

and in the latest report they do acknowledge that the circular debt is similar to back in 2015 due to improvement in line losses, increased recovery of bills and generation of electricity from more efficient plants etc. The bottom line is, if you do not take into account the liabilities of PHCL, The circular debt has piled up to 330 or so billion rupees since 2013 with 90% liabilities pending since 2015. The situation is improving and likely to resolve in the next 3-4 years

Thank you

I would also like to add one more point in to it.

In 2013, The average cost of electricity generated by:

Furnace oil = 18-24 rupees per unit
Natural Gas = 12 rupees
Hydro = 1-2 rupees
Line Losses = add 15-20%
Installed Capacity: 22500mw (only 13000mw was operational)

As you know Pakistan produces about 1/3 of electricity by thermal so it was impossible for them to generate electricity for average price of lets say 12-15 rupees per unit and supply to consumers for 8-12 rupees under various tariffs of commercial and household sectors. The more they generate, the more loss they will incur so they had to do plenty of loadshedding to incur minimum losses.

In 2016, The average cost of electricity generated by:

Furnace oil = 12 rupees per unit
Natural Gas = 8 rupees
Hydro = 1-2 rupees
Line Losses = add 15-18%
Installed Capacity: 27,000mw (around 21000mw is operational)

New projects mostly generate electricity for about 8 cents per unit, some of them literally free due to aid programs of small hydro power projects.

So the government is in better position to provide electricity to consumers as its not incurring as many loss as in 2013. The key reason why major cities of Pakistan are now getting electricity for 20-24 hours a day.

 

[VCheng]

Sir our journalists are amazing people and do not have consistency in news reporting so you will find contradicting reports of circular debt due to lack of detailed research.

Thank you for the detailed reply, but I would urge you to read the Wilson Center Report i linked above to get a better idea based on good quality research about this topic.

 

[Hyde]

Second, the claim is made that the circular debt has been capped at Rs 348 billion. This is in conflict with the statement by the IMF that it has reached 2% of GDP, over 600 billion.

According to USAid, The circular debt had reached 4% of GDP by 2011 if you know? as you are already claiming its reduced to 2% so I take it as compliment

Page 1 / Executive Summary: https://drive.google.com/file/d/0B7qakd8sfF_4ZDZiNVIxQmVCX28/edit

Circular debt at the end of Fiscal Year (FY) 2011 was estimated to be Rs537 billion. At the end of FY 2012 it was estimated to be Rs872 billion2 representing approximately 4% of the national nominal Gross Domestic Product (GDP). Circular debt, if continued unabated, will increasingly constrain the availability of electricity and slow down economic growth.

as as per USAid report: 1 year of circular debt between 2012-2013 is = 3 years of circular debt between 2013-16. Even lower when you count this year.

Some progress yeah?

I am sure with addition of Tarbela Extension IV, Neelum Jhelum, Karot, Suki Kinari, Kohala, Golen Gol, Patrind and various small hydro power projects adding about 7000mw within 5 years will ease the cost of generation even further as all of these projects are generating electricity between 2 rupees to 8 rupees per unit.

 

[VCheng]

According to USAid, The circular debt had reached 4% of GDP by 2011 if you know? as you are already claiming its reduced to 2% so I take it as compliment

That only means that the reasons for piling up circular debt are still there, and nobody is paying it the attention it deserves. More power generation is great, but it may not solve the problems.

 

[Hyde]

Thank you for the detailed reply, but I would urge you to read the Wilson Center Report i linked above to get a better idea based on good quality research about this topic.

Sir I am a optimistic person, I like to think positively

There is no doubt that we are incurring loss and there is no doubt we shouldn't be proud of reduction in losses, as loss is loss in the end. The only achievement is when Pakistan finally starts earning money from power sector.

But I have been following news really closely and for me

2012-13 = Loss of 335 billion rupees
2013-16 = Loss of 330 billion rupees

is an achievement that we are heading in right direction, hopefully by 2020 this problem will be resolved (optimistically)