Dr Farrukh Saleem

The cost of electricity from Rental Power Projects (RPPs) stands at Rs14.65 per kilowatt hour. Compare this with Rs11.77 per kilowatt hour from new Independent Power Producers (IPPs) and Rs11.26 per kilowatt hour from existing IPPs. The bottom line is that the RPPs are 24 per cent more expensive than the new IPPs and 30 per cent more expensive than the existing IPPs.

Yes, Pakistan is short on power. But consider this: one, WAPDA’s thermal power stations have a capacity of 3,580 MW and in June 2009 these power stations produced 2,715 MW — a 25 per cent shortfall. Two, the existing IPPs have a net dependable capacity of 5,509 MW and in June 2009 these IPPs produced 4,726 MW — a 15 per cent shortfall. Three, the two existing rental power projects have a capacity of 264 MW and in June 2009 they produced 198 MW — a shortfall of 25 per cent. That’s an accumulated shortfall of 1,714 MW — a shortfall that can immediately be turned into power.

From among the power producers in our private sector, the cheapest electricity is from the existing IPPs and then come the new IPPs. Logically, the top priority ought to be the full utilisation of our existing IPP potential followed by the new IPPs and then the massive captive power potential that exists at our sugar mills and textile mills. Member-mills of the Pakistan Sugar Mills Association have a potential generating capacity of 2,200 MW and that too using bagasse as fuel (bagasse is the leftover residue after sugarcane stalks are crushed and juice extracted from them). Talking of bagasse, the hidden electricity potential at our sugar mills may indeed be the cheapest source of power.

Just how much is rental power going to cost Pakistan? If we were to bring in 2,200 MW of rental power capacity then our annual payment to these rental power projects will be $3.1 billion (annual fuel payment of $2.3 billion and an annual capacity payment of $862 million). If we, on the other hand, bring in 2,200 MW of new IPPs then our annual payment to these new IPPs will be $2.5 billion (an annual fuel payment of $1.9 billion and an annual capacity payment of $646 million). In effect, the difference stands at a colossal $626 million a year for a total of $3.1 billion for the five-year contract period with most rental power projects.

Rental power is a $3.1 billion question. Amazingly, $3.1 billion is what we begged — and finally got — from the International Monetary Fund (IMF). Were we begging the IMF to pay our rental power producers? The Asian Development Bank (ADB) claims rental power is ‘inefficient’. The Private Power and Infrastructure Board (PPIB) has gone on record admitting that rental power is ‘expensive’. WAPDA has failed to pay IPPs — for electricity that is cheaper — then how can WAPDA pay for rental power that is much more expensive. The Pakistan Electric Power Company (Pepco) knows rental power is a mistake.

Just who is going to finance this multi-billion dollar mistake? National Bank of Pakistan shall be the first lamb. Next in line: Habib Bank, United Bank Limited, MCB, Askari Bank, Allied Bank, Alfalah, Citibank and Faysal Bank. Under the hammer — Saudi Pak Industrial and Agricultural Investment Company, Pak Kuwait Investment, Pak Libya Holding, Pak Oman and Pak China Investment (all would be as ‘pak’ as never before).

To be sure, there is as much love between rental power and Pakistani banks as between the wolf and the lamb. Vow, within the next five years $3.1 billion worth of loans to be written off! Remember, death to the wolf is life to the lambs. Is rental power expensive? Try ignorance.

The writer is the executive director of the Centre for Research and Security Studies (CRSS). Email: [email protected]

-Source: The News-