Punjab Power Policy

The Achilles heel of Punjab’s development and future growth is its large power deficit. Punjab is the only province of Pakistan which generates much less electricity than it consumes. According to the last Census of Electricity Establishments of Pakistan, Punjab accounts for about 60 percent of the electricity consumption in the country, but meets 64 percent of its requirements, implying a gap of about 3500 MW.

The cost of power loadshedding to Punjab is disproportionally large as compared to the rest of the country. According to a study by the Institute of Public Policy (IPP), the combined power outage cost to all sectors of the economy of Punjab in 2011-12 was as much as Rs 870 billion. The loss of employment is over one million, while the foregone exports are estimated to be $1.7 billion. Therefore, any reduction in loadshedding will yield high returns

Further, the share of Punjab in the national consumption of furnace oil as the energy source is two thirds. As such, since the tariff differential subsidy (TDS) primarily covers the higher costs of generation by furnace oil, effectively the major part of the TDS is targeted towards Punjab.

The government of Punjab seems to have realised somewhat belatedly that this is not a sustainable situation in the medium to long-run. This is indicated by the recent formation of a Punjab Energy Council headed by the Chief Minister, with a number of specialised committees. The first priority must be on reducing losses by improving the transmission and distribution losses and by tackling strongly the problem of electricity theft. Currently, the province loses about 13 percent of the electricity supplied. A reduction of these losses by one half is equivalent to additional capacity of almost 1000MW.

Beyond this, what are likely to be the key elements of a Punjab Power Policy? The province currently has no major proven natural gas reserves and, therefore, this option is ruled out. Similarly, the production of coal in Punjab is only 0.6 million tons and this is already being used in brick kilns and various industries.

Further, in terms of setting up coal-based plants, the province suffers a locational disadvantage, given its distance from the coastline. Probably, the best location for such plants is in South Punjab, like many of the existing IPPs. However, given the virtual collapse of Pakistan Railways, this does not appear a feasible option in the short run. The Railway handled only 0.4 million tons of freight in the first nine months of 2012-13. Even a 200 MW coal plant in Punjab would require transport of 0.8 million tons of coal. It seems now that Pakistan made a fundamental mistake of neglecting the railways at the expense of highways.

A comparison with India is of interest here. India generates 68 percent of its electricity from coal. The total volume of coal consumed in power generation is 639 million tons, with the national production at 540 million tons. Therefore, the sector depends only 16 percent on imports of coal. Electricity tariffs on average are relatively low, ranging from 8 to 13 cents per kwh. The Indian Railway system carries over 450 million tons of coal. Unless exploitation of Thar coal becomes feasible the same option does not exist in the medium run for Pakistan.

What are the States of India in the old Punjab doing in terms of their own generation of electricity? Combined the three states of Haryana, Himachal Pradesh and Punjab are using renewable resources of energy, with generation of 758 MW from small hydel plants, 122 MW from biomass and 22 MW from solar energy.

Punjab may pursue a similar strategy of adding capacity to the national grid with essentially technology based on renewable sources. For example, there are 46 sugar factories in Punjab consuming about 32 million tones of sugarcane annually. These factories already have captive plants for power and with a combination of bagasse seasonally and coal otherwise, an economically viable option can open up for Punjab. Similarly, significant potential probably exists for small run-of-the river hydel plants. Solar energy is still at the experimental stage and may not attract private investment initially.

But current priorities appear to be somewhat different. The Punjab Government proposes to devote Rs 18 billion, equivalent about 6 percent of the ADP of 2013-14 to the energy sector. The two major schemes are, first, Rs 7.5 billion for subsidy on solar tube-wells and, second, Rs 4.5 billion for REDSIP, a renewable energy program. The development allocation for small hydel projects is marginal.

The Chief Minister of Punjab has a reputation for delivering results once he puts his mind to a particular project. Therefore, it would not be unreasonable to assume that an additional 1500 MW or so of capacity will effectively be added within the next three to five years, through efforts of the government of Punjab, in collaboration with the private sector, both domestic and foreign. This will make a significant contribution to reducing loadshedding in the country.

(The writer is former Deputy Chairman of Planning Commission)