An Empirical Analysis of Private Energy Sector in Pakistan - Problems and Prospects

Article excerpt

Pakistan has been vigorously pursuing the policy of encouraging Private Sector Investment in Energy Sector for accelerating the pace of industrialization. In 1985, the Government of Pakistan embarked on an aggressive programme to encourage Private Investment in the Power Sector through the development of Power Projects. Pakistan was the first country in South Asia to embark on an Ambitious Plan.

Power Generation-economic and Social Development

Economic and social development of a country is characterised and correlated with multifarious factors. The developing countries have achieved rapid industrialization and advancement through energy intensive large scale production techniques which provide economies in sale of operation/production and yield maximum results. In Pakistan too, the operations in Large Scale and Medium Size (Capital and Intermediary Goods Industries) were through intensive use of energy which yielded maximum/accelerated growth in production particularly in manufacturing sector.

Institutions Dealing Private Power Projects

The institutions responsible and dealing exclusively with the Private Power Projects include:

* PPIB - Private Power and Infrastructure Board Ministry of Water and Power.

* WPPO - WAPDA Power Privatization Organization.

* Private Energy Division of National Development Organization.

The PPIB is responsible for promoting, evaluating and negotiating private investments in the Electric Power Sector. It also reviews Feasibility Studies and Implementation Time Tables.

WPPO of WAPDA is responsible for negotiating and finalizing the Power Purchase Agreement between WPPO and Private Power Companies. It reviews and negotiates all Tariff Agreements.

The Private Energy Division of NDFC looks after and control Private Sector Energy Development Fund (PSEDF). The fund which is designed for Private Power Projects is operated by NDFC and supported by the World Bank.

Present Installed Capacity: Presently the total installed capacity in the country is 11,346 MW out of which 54 per cent is Thermal and remaining 46 per cent Hydel. This capacity is insufficient to meet the demand.

Demand Growth Rate

In most of the developing countries, the demand for electricity is growing at 7 per cent per year. In Bangladesh, the electricity demand has been growing on an annual rate of over 11 per cent, in India over 10 per cent and in Pakistan over 12 per cent.

Plans to Increase the Power Generation Capacity

The Government plans to increase the Power Generation Capacity to 22,000 MW by the year 2,000.

Per Capita Consumption of Electricity

The per capita consumption of electricity in various South East
Asian countries is as follows:

                         (KWH)

Pakistan                   392
China                      550
Thailand                   825
Malaysia                  1373
Korea                     2761
Singapore                 5207
Hong Kong                 4823

Salient Features of Existing Power Policy

The Government of Pakistan formulated a Policy Framework and Package of Incentives for Private Sector Power Generation Projects in Pakistan in March 1994. This policy presents and deals with procedures for Application and Processing of Proposals. Tariff for Bulk Purchase of Power at Bus Bar, Financial Arrangements, Fiscal Incentives, Security Package namely Implementation Agreement, Power Purchase Agreement and Fuel Supply Agreement. The Government has provided Tariff of US Cents 6.5/KWH. In addition a premium of US Cents 0.25/KWH will also be provided to the projects above 100 MW, which are commissioned under this scheme by end 1997.

Brief Description of Major Private Power Generation Projects

Hub Power Project: HUBCO is a company set up to undertake the design, construction, finance, ownership and operation of a 1,292 MW Oil Fired Power Plant. …