Problem of Energy Shortage and Hike in Electricity Prices

According to National Electric Power Regulatory Authority’s (NEPRA) ‘State of Industry 2010’ report; supply of electricity will significantly remain short of demand till fiscal year 2015 (fiscal year starts on 01 July). The details are as under:

Actual Figures (National grid less Karachi)
Fiscal Year Generation Capability (MW) Demand during Peak Hours (MW) Surplus / (Deficit)
(MW)
2007 13292 15138 (1846)
2008 12442 16838 (4396)
2009 13637 17852 (4215)
2010 n.a. n.a. n.a.
Projected Figures (National grid less Karachi)
Fiscal Year Generation Capability (MW) Demand during Peak Hours (MW) Surplus / (Deficit)
(MW)
2011 17367 20873 (3506)
2012 18913 22459 (3546)
2013 21299 24126 (2827)
2014 21668 25918 (4250)
2015 30510 28029 2481
Actual Figures (Karachi Electric Supply only)
Fiscal Year Generation Capability (MW) Demand during Peak Hours (MW) Surplus / (Deficit)
(MW)
2007 2283 2349 (66)
2008 2265 2443 (178)
2009 2403 2462 (59)
2010 2393 2562 169
Projected Figures (Karachi Electric Supply only)
Fiscal Year Generation Capability (MW) Demand during Peak Hours (MW) Surplus / (Deficit)
(MW)
2011 2419 2690 (271)
2012 2833 2825 8
2013 2913 2966 (53)
2014 3413 3114 299
2015 3713 3270 443

This simply means that the issue of load shedding won’t be resolved until fiscal year 2015 (at least in Government books) provided Government’s fall-back plans materialize in desired manner. Based on empirical evidence, possibility of further hiccups and mishaps cannot be weeded out in any of government affairs save the energy crisis.

The electricity generation sector in Pakistan is a mixed industry of hydro, thermal and nuclear power plants. About 30 percent power is generated through hydel system, 67 percent through thermal system and the rest

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3 percent is generated through nuclear, coal and renewable power generation systems. The country meets its energy requirement around 41% by indigenous gas, 19 percent by oil, and 37 percent by hydro electricity. Coal and nuclear contribution to energy supply is limited to 0.16 percent and 2.84 percent respectively with a vast potential for growth. Here is the pie of energy mix extracted from ‘Pakistan Energy Year Book 2009’ published by the Hydrocarbon Development Institute of Pakistan (HDIP), Ministry of Petroleum & Natural Resources (MPNR) Pakistan.

The weighted cost per unit of electricity recently estimated by NEPRA is as under:

Category Fuel

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Source

Rs. Cost/kWh
Hydel 23% 0.4
Coal 0% 2.7
Diesel 2% 15.1
Furnace Oil 44% 10.7
Gas 30% 3.7
Nuclear 1% 0.5
Imported (Iran) 0% 4.2
Mixed 1% 10.5
Weighted Avg. 100% 6.2

One can see that diesel and furnace oil are the most expensive fuel sources for producing electricity and surprisingly the newly established electricity generation projects particularly those in private sector are based on these expensive fuel sources due to which electricity consumers have to pay more for electricity which is perpetually squeezing their discretionary incomes in painfully direct manner.

Another setback to the consumers is that after entering the International Monetary Fund (IMF) regime it is no longer possible for the Government to provide subsidy to the consumers any more. Previously, for instance, if the cost per unit of electricity was say Rs. 12 the consumer used to pay approximately Rs. 8 out of it and the remaining amount used to be offset by the Government. Now the consumer has to borne the entire cost – Fair? Let us make a case against this illusion.

Due to weak grid infrastructure and significant theft of electricity, losses from the transmission and distribution network usually account at about 22% for Water & Power Development Authority (WAPDA) and 34% for Karachi Electric Supply Corporation (KESC). Main regions where WAPDA / KESC are finding difficult to make recovery of electricity dues from subscribers include Quetta, Hyderabad, Peshawar and tribal areas.

There is much controversy regarding inclusion of Rental Power Projects (RPPs) in the power supply chain these days. Since these RPPs use furnace oil (save one which uses gas) to generate electricity so the rental tariffs awarded to them by the Government are exorbitantly high. Government justifies commissioning of RPPs as a panacea to the prevailing load-shedding problem. Last November, 232 MW Turkish RPP Karkey Karadeniz (Turkish ship) arrived in Karachi and the Government officials themselves admitted that it will produce expensive electricity. Initially the commercial operations date of this RPP was 10th April 2010 but the ship arrived late and to date it did not start its operations. There is also confusion whether this ship will supply electricity to Karachi or the national grid. Moreover, there are rumors that the plant is outdated and it takes a lot of electricity to kick-start it. This case is a true reflection of what the Government is doing to the innocent people of this country.

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energy chain is under acute stress these days because of the inter-corporate ‘circular debt’ which is currently hovering around Rs. 150 billion. The main reason behind accumulation of circular debt is non-payment of electricity dues by consumers, federal and provincial governments. Pakistan State Oil (PSO) is the main sufferer of the circular debt crisis as it supplies fuel to electricity suppliers in the private sector (Independent Power Producers – IPPs) and since WAPDA is facing recovery problem it is not possible for it to clear dues of IPPs. In turn IPPs cannot clear dues of PSO and PSO payables to refineries have also reached an alarming level. This is causing a great deal of stress on the entire energy supply chain. The only course left for the Government to resolve the circular debt crisis is to increase electricity tariffs. Hence the consumers who dutifully clear their electricity bills have to pay a heavy price for Government’s mismanagement, electricity theft, kick-backs and non-payment of electricity dues.

The situation in energy sector tantamount to either criminal negligence on the part of civilian bureaucracy or else some politicians are tactfully exploiting (engineering) the energy supply chain to fill their foreign bank accounts. Some people also attribute this state of affairs to international conspiracy against national security as all else becomes expensive when electricity becomes expensive. Rise in cost of electricity leads to stagflation which results in socio-economic turmoil. The standard of living of middle class has deteriorated manifold and life has become exceedingly difficult for those who are below the poverty line. How long will the people accept the prevailing state of affairs? This has now become a commonly asked question.

We shall see

Certainly we, too, shall see

that day that has been promised to us

When these high mountains

Of tyranny and oppression

turn to fluff and evaporate

And we oppressed

Beneath our feet will have

this earth shiver, shake and beat

And heads of rulers will be struck

With crackling lightning

and thunder roars.

(By Faiz Ahmed Faiz from http://faizcentenary.org/poems_in_english.htm)