Hypocrisy on Karachi’s electricity

It is bad enough that the Nawaz Administration is so beholden to the textile lobby that it would rather leave all of Punjab in darkness than force its friends to pay a little extra for their electricity bills. But the cynicism of blaming Karachi’s electricity supply for somehow being responsible for painful power outages in Punjab is simply unforgivable.

Let us start with an overview of the facts. K-Electric, the only electric utility in Pakistan that is mercifully not owned by the government, had an agreement with the state-owned National Transmission and Dispatch Company (NTDC) to buy 650 megawatts (MW) of electricity from the national grid at the same subsidised price at which the NTDC sells power to every other part of the country. That contract expired on January 26 and now the NTDC is trying to get out of renewing it, arguing that it is unfair of K-Electric to continue buying electricity from the grid when it is not even using its own power generation capacity to the fullest. It also argues that the 650MW could be diverted towards Punjab to help alleviate that province’s electricity shortage.

It is true that K-Electric has a power generation capacity of nearly 2,500MW and the demand in Karachi usually does not exceed that level. So why bother continuing? Why not end the dispute by ending the NTDC contract and ramping up local power generation in Karachi?

Because many of the older plants owned by K-Electric run on furnace oil, which is one of the most expensive ways to produce electricity. Most of those plants can be converted to natural gas, which is a much cheaper source of energy, but herein is where K-Electric runs into its problem. The government-owned Sui Southern Gas Company, which is contractually obligated to provide K-Electric with over 270 million cubic feet per day (mmcfd) of gas, rarely ever meets that target, often supplying up to 100mmcfd less than it should.

Why does the government not supply K-Electric with that gas? After all, would that not solve both Karachi and Punjab’s problem? Yes, it would. But it would mildly inconvenience the textile lobby in both Karachi and Punjab, which is apparently a big no-no to all governments in Pakistan — be they military or democratic, right-wing or left-wing.

Electricity costs constitute approximately three per cent of the total cost base of most of the large textile firms that can afford to have their own gas-fired power plants. Were they to shift from their own plants to the grid, their overall costs would go up by less than one per cent, but they would rather push all of Pakistan into darkness than see their costs rise by that measly one per cent. So the government, beholden as it is to the textile lobby, continues to supply it with natural gas at the expense of the power companies, favouring larger, more powerful companies over smaller ones.

And so, rather than provide K-Electric with the gas it needs to solve the whole problem, the government accuses the one company competently running an electricity grid in Pakistan of avarice, blaming its insistence on renewing the NTDC contract for Punjab’s electricity problem.

Here is the part that the Nawaz Administration leaves out: while accusing K-Electric of using up 650MW of electricity from the national grid to keep its costs down, the government is refusing to turn on power plants in Punjab that can collectively produce 6,378MW for the exact same reason. Karachi’s textile companies are not the only greedy ones. So are those in Punjab and there are a lot more of them there.

Shutting down the NTDC supply to Karachi would hurt the city very badly. But it would do absolutely nothing to solve Punjab’s electricity problem. This is not a government taking action against a greedy utility company. This is a government failing to stand up to the country’s most powerful industrial lobby and then disguising that with a cheap ‘divide and rule’ tactic. Punjab is not dark because Karachi has lights. It is dark because our ruling elite have chosen craven self-interest over the greater good.

Published in The Express Tribune, February 6th, 2015

Farooq Tirmizi

CEO, Elphinstone

Farooq Tirmizi is the founder and CEO of Elphinstone, the financial services firm that operates SmartRupee.

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