How did you become an expert on energy policy for the government?
Well, I was the federal minister for Water and Power in the caretaker setup. After that stint, the elected government asked me to give a debriefing on the power sector issues. I do not handle the sector; Khawja Asif and Abid Sher Ali manage that. I give advice to the prime minister and the cabinet committee on energy. I keep getting invited to various television talk shows to discuss government’s energy policy, (among other things), hence you see me speaking out on energy.
What’s your take? What is the real problem?
There are three major problems. First, there is an electricity supply and demand gap, this causes enormous distress and suppresses economic growth which in turn creates unemployment among the youth of Pakistan. The second problem is affordability. The poor of Pakistan can’t afford to run electricity at the current price points. The third issue is efficiency. The poor efficiency levels are driven by theft, non-payment of bills and poor tariff structure, hence the famous ‘circular debt.’
If these issues have already been identified, why can’t they be solved?
Let’s take it one by one. The supply and demand gap Pakistan’s population is increasing. The issues started becoming visible by the early 2000s and not a much was done to set up new power plants. Pakistan waited too long. The common sense solution is to build more power plants in a phased manner. The cost of not having electricity is high. There are three ways we can address this gap – by creating short term, medium and long term plans. In the short term, (a period of two-and-half-years), the objective is to have more power plants, by medium term, (a period of three to five years), our focus is to bring the price of electricity down and in the long term, our goal is to make the electricity affordable across the board by bringing the cost down and creating sustainability in the system. I think, we will be able to create a ‘balanced portfolio’ – in the final phase, we are aiming to supply demand (corporate, retail and industrial, domestic and public), in the medium term we will bring the cost down to affordable levels for all, and in the long term, we will make it sustainable.
Now, let’s take the problem of efficiency. For the past 10 to 15 years, the existing infrastructure, power generating companies and large industrial corridors have not been upgraded or maintained. This whole power generation structure is equally shared by public and private sectors. I’ll give you an example of Guddu – in year 2005, an overhaul of this plant was due. This was not done. Between the period of 2005-2012, around three to four tenders later (can’t recall the exact number right now), no tender was awarded. Some decision maker decided not to give the award. In 2012, due to this mismanagement, the plant was turned off for a minute or two. Just shutting it down damaged the structure and the plant became junk. Most of the plants are 20 to 25 years old and have not been maintained. The government has been doing what it can to restore power with whatever projects are in hand. In the period of two years, 1,500 to 2,000 MW have been restored to the system – Guddu, Jam Shoro, Muzzfarghar. By just restoring plants in the public sector, now, in the third year, we have been able to produce 1,000 MW more. The difference between 1,000 MW in phase 1, and right now, in phase 2, the system has been able to produce 3,600 MW (from liquefied natural gas -LNG – based power plants).
The government is concentrating on the following major items: One, building a terminal in Karachi; two, laying down a pipeline between Karachi and Central Punjab; and three, building up these power projects. All this needs to be taken care of in tandem over a period of two-and-half-years, otherwise, the delay in one item could cause the whole plan to derail and become costly – 3,600 MW would be added in two years simple cycle, then in another year, efficiency will be improved from 50 percent (in simple cycle of 2 years) to 60 percent in (combined-cycle of three years). Right on the heels of this, phase 3 would be implemented – 5,000 MW of coal fire programs will be introduced via China-Pakistan Economic Corridor (CPEC). The plants will be built in the period of three years and they will become operational and online within six months. So from zero to operational and online status they will take three and half years.
Let me recap – the first phase of the plan is restoration, the second phase consists of finishing the projects in the pipeline – Neelum-Jehlum (1,000 MW), Nandipur (500 MW), Tarbela extension 4 (1,200-1,400 MW), the third phase is of work on LNG power plants and fourth phase is of creating new plants based on coal-fired technology. In the final phase, the focus will be on the hydropower projects: Dasu (2,400 MW) located in Khyber Pakhtunkhwa (KP), financing by World Bank, on completion, 2,000 MW, so total 4,400 MW to be added to the system; Suki Kinari (900 MW), again located in KP, financing by CPEC costing $2-3 billion plant; Karot (900 MW), costing another $2-3 billion also part of CPEC. There are numerous other projects that I have not mentioned here. All of them are the major ones.
By restoring energy online, by expediting and finishing projects as soon as possible, thereby, not wasting money and by introducing LNG, wind and solar technology, we will generate clean and fast energy in one and half years each – 1,000 MW of solar, 1,000 MW of wind and next phase is of coal which has the burden of illness and environment but is cheap, though, we are planning to use super critical boilers and turbines to offset the environmental factor – the technology is still dirty but comparatively cleaner than other forms of coal-fire energy generation. To give you an example, 40 percent of USA’s energy comes from coal and 60 to 65 percent of India and China’s. In Pakistan, so far, it’s zero percent. We don’t want to burn a hole in the environment but this tech would not be so damaging that it will compromise the health of future generations of Pakistanis. The hydropower will bring sustainability as water is a continuous resource. Water, wind, solar and LNG are all forms of clean energy. That leaves only coal which causes pollution so I think we are making a pretty balanced portfolio.
We have countrywide plans which are being implemented in a phased manner. First pilot project in Lahore has been running for more than a year now. We have adopted a three-pronged approach to sorting this out – first – by introducing smart technology; second, by creating accountability in the system; and third by improving our human resource practices.
The smart meters help us monitor theft and loadshedding. The tech is installed at each feeder level. We can tell how much electricity is being received and billed in real time, now, through these meters we can get profit/loss statements at each feeder level across the country. This data can’t be tampered with- you are receiving trillions of gigabytes every 15 minutes, how can you fudge the numbers? So the data is real-time, without human intervention. This has been implemented across the country for more than a year now. We have a system in place for internal tracking – a parallel system of real-time raw data that automatically collects and can be pulled up at a website which is independent of the second set of data that is taken from the same source (smart meters) but is analyzed by the distribution companies (Discos) and forwarded to us. We triangulate both sets of data. This helps us monitor theft and loadshedding. By ensuring transparency and creating accountability at each feeder level, we can tell if the difference between received and billed is based on infrastructure inefficiencies (long length of lines) or at human level (corruption). This pilot project (Lesco) has been in operation for six to eight months already. To mitigate corruption, we have introduced handheld devices that take photos of meters with geographic coordinates. Consumers will get the image of their meter reading in their bills. Furthermore, they will get an SMS alert informing them of the date when their meter reading is to be done and another alert when it’s actually done. The consumers can verify before and after within 24 hours if they see any discrepancies. You will see this happening within a few months. Currently, the staff is gathering data (collecting consumer’s cell phone numbers). This way, we will eliminate systematic discrepancies and any opportunities for corruption.
We are paying attention to the staffing needs. There is a clear discrepancy between staff available and actual number of meters out there. The staff can’t physically check each meter. They probably estimate. We are planning to outsource this task. There will be checks and balances in the system so if the private sector company (which is awarded) this task can’t perform, its contract will be terminated, not to mention, it will be blacklisted from ever doing any government work. We will remove the burden of inhuman pressure to physically check each meter reading per person and create more reasonable work conditions for our staff. Another advantage would be that we can also review the public versus private sector performance. We can introduce best practices across the whole system.
We are introducing aggressive health, occupational career development plans for the staff. They’re our assets. We are committed to building their career paths so that they in turn they have a better lifestyle and work conditions and can develop career competencies to perform their jobs better. We want to develop our people, our country and our employees. To sum up – for system efficiencies, we are introducing transparent and independent tracking by smart technology, creating staff accountability, and improving our human resource practices by outsourcing tasks where required. Theft might mean that offender might not pay that particular bill but he forces everyone else to foot his bill. When consumers understand that, whistle blowing might become commonplace. Tariff will come down. We are taking many small measures but I have only explained big ticket interventions to you. Lahore is serving as our incubator. We plan to scale up the process across Pakistan.
There are three major problems. First, there is an electricity supply and demand gap, this causes enormous distress and suppresses economic growth which in turn creates unemployment among the youth of Pakistan. The second problem is affordability. The poor of Pakistan can’t afford to run electricity at the current price points. The third issue is efficiency. The poor efficiency levels are driven by theft, non-payment of bills and poor tariff structure, hence, the ‘circular debt.’
Do you really think price of electricity will come down with the new energy mix?
Yes, the price per unit will come down. I am not at liberty to disclose the pricing, we have a policy of non-disclosure right now, but even with importing LNG and replacing the furnace oil with LNG, we get a one billion dollar advantage, not to mention, additional generation capacity. With the production of coal power, price will become even better. For coal projects the money is allocated already not from the budget. The funding is being financed through CPEC. For LNG projects (Punjab) the government is funding it from its own resources, in fact, it’s the highest funded project by local banks ever. We achieve sustainability as the cost of production gets lowered. That’s phase 3 of the plan. In the last phase we have hydropower projects – Neelum-Jehlum, Dasu, Sukhi Kinari and Karot, that’s sustainable on all counts.
How will you ensure this policy doesn’t get derailed?
Well, 80 to 90 percent of this plan will be implemented in this government’s tenure. The remaining 10 to 20 percent would be so little that the next government will be forced to continue our policy. In any case, our policy is in the national interest. We are not interested in political mileage, as 60 to 70 percent of the results will bear fruit in the next government’s term. Our goal is to use indigenous sustainable resources. We envision Thar to be the energy capital of Pakistan.
We have money committed through CPEC. On top of this block, there’s Engro project partnership with the government. Our prime focus is on indigenous resources, for coal only a little bit is based on imports, one project is in Sahiwal, two projects at Port Qasim, the rest is all based on indigenous resource. There are coal deposits in the salt range. This would be cheap and affordable. Then, there’s Casa project (1,000 MW) this is from Central Asia and based on direct import. Not only will it bridge the supply demand gap, it will be sustainable and affordable. Just by restoring power generation, the price per unit has come down by PKR 6 per unit. It will come down more when we introduce more power plants in to the system…
What is circular debt? What government policy is creating this? How can you get rid of it?
What’s driving the circular debt? The tariff structure, losses and subsidies. For example suppose, there are 15 percent losses in Lahore. The regulator doesn’t allow us to charge the full 15 percent to the consumer, it allows only 10 percent. The remaining five percent difference is circular debt. The government has to pay for that. The government can’t charge that five percent loss. Also, our collection is deficient. We have 87 percent average whereas it should be 100 percent or at least 97 percent. Then there are subsidies… to give you a few examples, Azad Jammu and Kashmir (AJK), Federally Administered Tribal Areas (Fata) and tube wells dispute in Balochistan. PKR 115-120 billion. AJK buys cheap, sells expensive to its consumers and won’t pay the difference. All these accumulated differences come under the heading of circular debt. This is an ongoing phenomenon. National Electric Power Regulatory Authorty (Nepra), the regulator, is an independent body. The government can’t force it. Bottom line, morbidity of tariff and company’s inefficiencies, deficient collection and subsidies causes this problem. The circular debt is being decreased every month. It’s primarily deficient collections and losses. We are taking number of measures to settle this once and for all. We are negotiating with Nepra, improving our theft and collection system, and have formed a committee to settle all subsidy disputes. Circular debt will go away – or at the very least, will become minimal in the sense that it no longer will be an issue.
Year 2030 – where would Pakistan be if the current policy is continued?
I see Pakistan as a prosperous country. If you take GDP numbers – when I say prosperous, I say there will be no energy crisis in year 2030, hopefully, we will be producing surplus energy and even exporting it. People will be able to live with integrity and prosperity.