NEW YORK – Pakistan’s power transmission and distribution system is“bankrupt”, which requires extensive overhauling, Bloomberg says in areport.
“In Pakistan’s Tharparkar desert, Chinese and Pakistani workers toil in theblistering heat to complete the construction of a massive open pit coalmine and an adjacent 660 megawatt power plant four months before schedule.The roadblocks will come soon after,” the report says.
“When Engro Corp, one of Pakistan’s largest conglomerates, which ispartnering with China, begins generating electricity from the plant inDecember, it will hit a distribution and transmission network that isessentially ‘bankrupt’, according to Shamsuddin Shaikh, the chief executiveofficer of Engro’s energy arm,” it added.
Bloomberg quoted Shaikh as saying, “The system has already collapsed,really the system is just existing because the government every few monthswill churn out some money, dole out some money and the system keeps onworking.”
“Lots of overhauling is required. Distribution needs to be improved, thetheft needs to be removed from the system,” he added. The report saysPakistan has added half of its power generating capacity in the past fiveyears with Chinese help but a weak distribution network means companies andhouseholds are still bereft of electricity. Prime Minister Imran Khan facedimmediate complaints after he was elected premier by lawmakers last monthwhen the nation’s largest city Karachi was hit by an all-night blackout.Residents in the metropolis of more than 15 million took to Twitter to ventanger at the local distribution company K-Electric Ltd and mock Khan’spromise of a new Pakistan.
“Widespread theft, along with a bloated debt and imbalanced paymentssystem, are the major causes of Pakistan’s electricity challenge.Government-mandated tariffs aren’t high enough to recover costs andsubsidies are rarely paid on time, leading to what is known locally ascircular debt that has accumulated to about 1.2 trillion rupees ($9.7billion), according to the finance ministry,” the report says.
“It’s not possible for anybody to give that money, they have to improve thesystem,” said Shaikh. “They need to privatise the distribution system, theyjust cannot go on like this.”
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According to Bloomberg, “Khan’s government, which is facing a potentialbailout from the International Monetary Fund, has pledged to reduce thatdebt by fixing the aging transmission network and limit distributionlosses. His Movement for Justice party said in its election manifesto thatit would support the expansion of Engro’s Thar coal project, as well asrenewable power generation.”
“However, Khan’s administration has already ruled out selling itsloss-making state corporations after previous governments failed to makeheadway because of strident unions or financial mismanagement at thecompanies. Karachi’s K-Electric is Pakistan’s only privatized distributioncompany and managed to stem outages by implementing a strict billing andcollection system since 2008 — though it still faces challenges fromcircular debt and an aging grid that has yet to be significantly revamped.”
The report says Engro’s coal power project is part of a wider wave ofChinese-constructed plants across the country raising generation that hashelped the nation add 11,000 megawatts in the past five years to combatPakistan’s continual blackouts. China is financing infrastructure projectsworth about $60 billion as part of the Belt and Road initiative and hasincreased Pakistan’s machinery imports. That has exacerbated Pakistan’sfinancial crisis as the nation’s current-account deficit continues to widen.
“Engro, which was previously owned by Exxon Mobil Corp, is looking toexpand in the power sector. The coal project will continue expanding inphases with investments reaching as much as $9 billion by 2024, making itthe biggest project in terms of cost while it plans to bid for wind andhydro projects,” it added.
The report ends with a quoted statement of Shaikh, “Pakistan doesn’t have ageneration problem, it’s more a transmission, evacuation and distributionproblem and we at Engro are looking into these things.”
