Punjab’s energy problem

There is almost no solution to Punjab’s energy problem which does not depend on Sindh Chief Minister Qaim Ali Shah being driven out of office and being replaced by somebody who is at least vaguely competent. This is why, no matter how hard Finance Minister Ishaq Dar and Water and Power Minister Khawaja Asif try — and they are not trying at all — they are unlikely to be able to solve the problem in Punjab.

Here is what it all boils down to: of the four main types of electricity generation that are viable in Pakistan — hydroelectric power, oil-fired thermal, natural gas or coal — Punjab neither has the necessary fuel nor can it obtain it in an economically viable manner. In short, Punjab is, for the moment, dependent on the mercy of other provinces for its energy sources, and on Sindh more than most others. Unfortunately for Punjab, Sindh has a government so thoroughly disinterested in governing that I hesitate to call it incompetent for fear of giving incompetent people a bad name.

Let us take a look at each of the options available and why they might not work for Punjab. For hydroelectric power, Punjab simply does not have enough places to be able to build dams for the kind of large power plants that would fulfil its needs. Run-of-the-river hydroelectricity is an option, but in a province so densely populated, it is unlikely that there will be enough places in Punjab to install the kind of capacity needed to supply its needs.

Oil-fired power is quite obviously a no-go for Punjab, as it is for any other part of Pakistan, on account of its high cost of production. Punjab already has nearly 7,000MW of installed capacity for power plants that run both on oil and natural gas, and the government does not run them largely due to the fact that it would massively run up the subsidy bill.

Coal is an option that has been presented as a possible solution to Punjab’s woes. Unfortunately for Punjab, the only feasible way to transport coal is through rail, and the utter inability of Pakistan Railways to get anything done is an inviolable assumption that one must make when analysing the Pakistani economy. So any coal — whether it be imported or mined at Thar — cannot economically be transported to power plants in Punjab.

That leaves only one option: natural gas. And here is where the Sindh problem comes to the fore.

Over 70 per cent of natural gas in Pakistan is produced in Sindh, and the Constitution gives the province the right of first use. The PPP-led government in the province has taken that to mean that it can do whatever it wants with the natural gas it has and that it does not have to answer to anybody about it. Hence, the Sui Southern Gas Company handed out new gas connections all over Sindh during the PPP’s last term in office in the province. Much of the gas being provided to those new connections was stolen, resulting in higher losses on the national gas grid.

Now, a reasonable person might assume that Sindh might be persuaded to give up some of its gas to Punjab in exchange for concessions on other fronts. But that would imply that the Sindh government is interested in accomplishing anything at all, which is an assumption not supported by any evidence thus far. And so, while the country might have just enough gas to run power plants in Punjab, that gas — unfortunately — is being mostly wasted in Sindh either through outright theft or because it is being sold at outrageously low prices to consumers who use it wastefully.

There is, of course, one last option that just might work, but only because it bypasses the Sindh government completely. The cheapest way to transport fuel is not through rail, but by converting it into electricity and sending it across the transmission grid. If the Hub Power Company and K-Electric are able to install enough coal-fired power plants in Karachi and Hub, they would eventually be able to produce enough cheap electricity to be able to sell it to Punjab.

Unfortunately, that is a project that would take five years or more to implement. In theory, by that time, Sindh could get a better chief minister. But since when have we had that kind of luck?

Published in The Express Tribune, February 13th,  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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