Haq's Musings

Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://www.southasiainvestor.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Showing posts with label Coal. Show all posts

Thursday, December 22, 2022

Rural Pakistan: New Infrastructure Driving Socioeconomic Revolution in Tharparkar

In a 2018 New York Times Op Ed titled "How Not to Engage With Pakistan", ex US Ambassador to Pakistan Richard G. Olson wrote: "Its (CPEC's) magnitude and its transformation of parts of Pakistan dwarf anything the United States has ever undertaken". Among the parts of Pakistan being transformed by China Pakistan Economic Corridor (CPEC) are some of the least developed regions in Balochistan and Sindh, specifically Gwadar and Thar Desert. Over 70% of Thar desert's population is Hindu.

Tharparkar: Road Built Under CPEC. Source: Emmanuel Guddu

More recently, Pakistani architect and social activist Arif Hasan has detailed the socioeconomic impact of new infrastructure in Tharparkar district, further reinforcing what Ambassador Olson wrote about how CPEC is transforming Pakistan's least developed areas. In his book titled "Tharparkar: Drought, Development, and Social Change", author Arif Hasan has highlighted the following (excerpted from Arif Hasan's recent piece published in Dawn):

1. New roads, airports, solar panels, cell towers and mobile phones are opening up opportunities for employment, entrepreneurship, education and healthcare for the Thari population.

2. New infrastructure is empowering Thari women to challenge the long established patriarchy in Tharparkar. A major change has occurred in gender relations — males are less restrictive; there is an increase in education and hygiene; women now move around without male escorts. Women are giving up old traditional clothes for more fashionable dresses.

3. Road construction in Thar that started in the Musharraf era (2000-2008) has made transportation cheaper and easier. Before these new roads, the old six-wheeler kekra (WW II era American Army truck) was the only mode of vehicular transportation in the desert. It was slow and expensive. It has now been replaced by normal Bedford trucks which are cheaper to run.

4. Bank loans to buy taxis are now available. Number of taxis operating in Thar has increased from 150 to over 400, while the qingqis in Mithi have increased from over 150 to over 300 since 2013.

5. The old kekras (old American Army 6-wheelers) have been converted into water tankers; people can now actually order one by phone, to pick up potable water from Mithi and deliver it to villages.

6. The new roads have helped substantially increase trade and commerce. Thar’s agricultural produce now reaches distant markets — six to seven trucks per day carry onions from Nagarparkar to Lahore, and vegetables and fruit from other parts of Sindh and Punjab are now easily available in Thar.

7. Roads have helped in the increase of salt and china clay mining. These have created more jobs, especially for those villages that are next to the mines. The lives of the families who have benefitted from this growth in the job market have changed and the first investments they make is in the building of pakka houses, with steel channel and brick-tiled roofs. Another important investment is in motorbikes, which makes flexible and faster mobility possible. People have sold their camels and donkeys to buy motorbikes.

8. Thari men now work in the garment industry in Karachi, where they save and send home Rs 10-12,000 a month.

9. Tourist traffic has grown in Thar with tens of thousands of people visiting the area every year after the rains and for the many religious festivals that the desert celebrates. Women producing traditional handicrafts are able to sell their wares to the tourists. This creates economic opportunities for the local population.

10. Dozens of carpentry workshops are now operating in Mithi. The carpenters have moved in from the rural areas of Thar, where they worked for the rural population, who paid them in grain.

11. Number of retail stores has also increased — in Mithi there were 20 to 25 grocery stores in 2015, as opposed to seven or eight 10 years earlier. Earlier, the store owners used to travel to Hyderabad to buy goods but, today, because of the road and mobile phone, they just order the items from Karachi and the transporter delivers them. The clients at the stores are both rural and urban.

12. Access to healthcare units in district capital Mithi is a lot easier and faster, and has been of special importance in maternity-related cases.

13. With the construction of new roads, the villagers are now more willing to send their children to school, including girls, because schools are easier to access.

Back in 2018, I wrote a post titled "CPEC is Transforming Least Developed Parts of Pakistan". Below is an except that talks about Thar development:

Thar Desert:

Thar, one of the least developed regions of Pakistan, is seeing unprecedented development activity in energy and infrastructure projects. New roads, airports and buildings are being built along with coal mines and power plants as part of China-Pakistan Economic Corridor (CPEC). There are construction workers and machinery visible everywhere in the desert. Among the key beneficiaries of this boom are Thari Hindu women who are being employed by Sindh Engro Coal Mining Company (SECMC) as part of the plan to employ locals. Highlighted in recent news reports are two Hindu women in particular: Kiran Sadhwani, an engineer and Gulaban, a truck driver.

Kiran Sadhwani, a Thari Hindu Woman Engineer. Source: Express Tribune

Thar Population:

The region has a population of 1.6 million. Most of the residents are cattle herders. Majority of them are Hindus. The area is home to 7 million cows, goats, sheep and camels. It provides more than half of the milk, meat and leather requirement of the province. Many residents live in poverty. They are vulnerable to recurring droughts. About a quarter of them live where the coal mines are being developed, according to a report in The Wire.

Hindu Woman Truck Driver in Thar, Pakistan. Source: Reuters

Some of them are now being employed in development projects. A recent report talked of an underground coal gasification pilot project near the town of Islamkot where "workers sourced from local communities rested their heads after long-hour shifts".

Hindu Woman Truck Driver in Thar, Pakistan. Source: Reuters

In the first phase, Sindh Engro Coal Mining Company (SECMC) is relocating 5 villages that are located in block II. SECMC is paying villagers for their homes and agricultural land.

SECMC’s chief executive officer, Shamsuddin Ahmed Shaikh, says his company "will construct model towns with all basic facilities including schools, healthcare, drinking water and filter plants and also allocate land for livestock grazing,” according to thethirdpole.net He says that the company is paying villagers above market prices for their land – Rs. 185,000 ($ 1,900) per acre.

Saturday, December 10, 2022

India's Crony Capitalism: Modi's Pal Adani's Wealth Grows at the Expense of Ordinary Bangladeshis and Indians

Prime Minister Shaikh Hasina has agreed to buy expensive electricity from India in spite of a power glut in Bangladesh, according to a report in the Washington Post. The newspaper quotes B.D. Rahmatullah, a former director general of Bangladesh’s power regulator, as saying, "Hasina cannot afford to anger India, even if the deal appears unfavorable." “She knows what is bad and what is good,” he said. “But she knows, ‘If I satisfy (Gautam) Adani, Modi will be happy.’ Bangladesh now is not even a state of India. It is below that.” The Washington Post report says: "Facing a looming power glut, Bangladesh in 2021 canceled 10 out of 18 planned coal power projects. Mohammad Hossain, a senior power official, told reporters that there was “concern globally” about coal and that renewables were cheaper".

Gautam Adani (L) and Narendra Modi

India Ranks High on Crony Capitalism Index. Source: Economist

Hasina recently visited New Delhi to seek political and economic assistance from the Indian Prime Minister Narendra Modi. This summit was preceded by Bangladesh Foreign Minister Abdul Momen's trip to India where he said, "I've requested Modi government to do whatever is necessary to sustain Sheikh Hasina's government". Upon her return from India, Sheikh Hasina told the news media in Dhaka, "They (India) have shown much sincerity and I have not returned empty handed". It has long been an open secret that Indian intelligence agency RAW helped install Shaikh Hasina as Prime Minister of Bangladesh, and her Awami League party rely on New Delhi's support to stay in power. Bangladesh Foreign Minister Abdul Momen has described India-Bangladesh as one between husband and wife. In an interview with Indian newspaper 'Ajkal,' he said, "Relation between the both countries is very cordial. It's much like the relationship between husband and wife. Though some differences often arise, these are resolved quickly." Both Bangladeshi and Indian officials have reportedly said that Sheikh Hasina "has built a house of cards".

Shaikh Hasina (L) with Narendra Modi

The Washington Post reports that the Modi government has changed laws to help Adani’s coal-related businesses and save him at least $1 billion. After a senior Indian official opposed supplying coal at a discount to Adani and other business tycoons, he was removed from his job by the Modi administration, according to the paper. Modi has continued to support Adani's business with discounted coal even after telling the United Nations he would tax coal and ramp up renewable energy. India is the world's third largest carbon emitter.

World's Top 5 Carbon Emitters. Source: Our World in Data

While the coal prices have declined to the level before the start of the Ukraine War, Adani’s power would still cost Bangladesh 33% more per kilowatt-hour than the publicly disclosed cost of running Bangladesh’s domestic coal-fired plant, according to Tim Buckley, a Sydney-based energy finance analyst.

India's Crony Capitalism: Adani Enterprises Stock Up 56,000% on Modi's Watch

Gautam Adani has become India's richest and the world's second richest person (after Elon Musk) since the election of Prime Minister Narendra Modi in 2014. Financial Times calls Adani "Modi's Rockefeller". Adani's rise owes itself to India's crony capitalism, according to France's Le Monde. Here's an excerpt of a Le Monde story on Adani:

"Adani has not invented some revolutionary technology or disruptive business model. His meteoric success cannot be attributed to innovation. In each sphere of activity among his conglomerates – airports, ports, mining, aerospace, defense industry – the Indian state plays a significant role, whether in allocating licenses or signing contracts. He is known as a close friend of Indian Prime Minister Narendra Modi, who also hails from Gujarat, a state in western India".

Adani has lent his personal airplanes to Modi for BJP's election campaigns. Adani has also recently taken over NDTV, the only Indian major TV channel known for its independence from the BJP government. This takeover has forced Prannoy and Radhika Roythe, the channel's founding couple, to step down. It has also forced out Ravish Kumar, a harsh critic of the Modi regime who hosted a number of popular shows like Hum Log, Ravish ki Report, Des Ki Baat, and Prime Time.

Income Inequality Map. Source: World Inequality Report 2022

India is one of the most unequal countries in the world, according to the World Inequality Report 2022. There is rising poverty and hunger. Nearly 230 million middle class Indians have slipped below the poverty line, constituting a 15 to 20% increase in poverty. India ranks 94th among 107 nations ranked by World Hunger Index in 2020. Other South Asians have fared better: Pakistan (88), Nepal (73), Bangladesh (75), Sri Lanka (64) and Myanmar (78) – and only Afghanistan has fared worse at 99th place. Meanwhile, the wealth of Indian billionaires jumped by 35% during the pandemic.

Sunday, June 26, 2022

Modi's India Busting Western Sanctions, Funding Russia's War On Ukraine

India, a western ally, is openly buying Russian coal, oil and weapons worth tens of billions of dollars at deep discounts. These actions amount to busting western sanctions and financing President Vladimir Putin's war on Ukraine. Many smaller developing countries, including Bangladesh and Pakistan, are abiding by these sanctions and suffering from the consequences in terms of high prices of fuel and food. Why these double standards? Do these policy contractions serve the broader US interests in the Asia region?

India's Russian Imports Soaring Since the Start of Ukraine War. Source: Reuters

India's Russian coal imports are up 6-fold from May 27 to June 15, 2022, according to Reuters. Delhi's Russian oil buying has jumped 31-fold in this period. Bulk shipments of Russian thermal coal to India began in the third week of May, 2022.

India is defying western sanctions to buy millions of barrels of discounted Russian crude oil, hiding their origin and exporting refined petroleum products with a big markup to make a huge profit. China has yet to increase its oil imports from Russia, according to news reports. Meanwhile, India's neighbors Bangladesh and Pakistan are abiding by western sanctions and paying much higher market prices to buy oil for their domestic needs, and hurting their people. Such double standards are not going unnoticed.

India's Refined Petroleum Exports.Source: MarketWatch

India is importing large amounts of deeply discounted Russian crude, running its refiners well above capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe, according to MarketWatch. “As the EU weans from Russian refined products, we have a growing suspicion that India is becoming the de facto refining hub for Europe,” said Michael Tran, global energy strategist at RBC Capital Markets, in a Tuesday note. Here’s how the puzzle pieces fit together, according to Tran:

"India is buying record amounts of severely discounted Russian crude, running its refiners above nameplate capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe. In short, the EU policy of tightening the screws on Russia is a policy win, but the unintended consequence is that Europe is effectively importing inflation to its own citizens. This is not only an economic boon for India, but it also serves as an accelerator for India’s place in the new geopolitically rewritten oil trade map. What we mean is that the EU policy effectively makes India an increasingly vital energy source for Europe. This was historically never the case, and it is why Indian product exports have been clocking in at all-time-high levels over recent months".

Bangladesh and Pakistan are afraid to buy Russian oil for fear of western sanctions while American ally India feels free to do so. Pakistan's Imran Khan sought to buy Russian oil and gas before he was removed from power in early April. Pakistani Finance Minister Miftah Ismail told CNN's Becky Anderson in a recent interview, “It is very difficult for me to imagine buying Russian oil. At this point I think that it would not be possible for Pakistani banks to open LCs or arrange to buy Russian oil". Similarly, Bangladeshi foreign minister AK Abdul Momen said, “Russia has offered to sell oil and wheat to us, but we can’t do it out of fears of sanctions. We asked [India] how they did it [import oil from Russia]. They [India] said they have found some tricks,” Momen added.

The West, particularly the United States, is turning a blind eye to India's actions when it comes to busting sanctions on Russia. Indian Prime Minister Narendra Modi is openly funding the war in Ukraine by buying weapons and energy from Russia. At the same time, India's smaller neighbors feel intimidated by the threat of western sanctions if they follow Modi's example. Such double standards are not going unnoticed.

Friday, January 21, 2022

Pakistan Nuclear Power Generation Soared 66% in 2021

Nuclear power plants in Pakistan generated 15,540 GWH of electricity in 2021, a jump of 66% over 2020. Overall, Pakistan's power plants produced 136,572 GWH of power, an increase of 10.6% over 2020, indicating robust economic recovery amid the COVID19 pandemic.

Pakistan Electric Power Generation. Source: Arif Habib

Hydroelectric dams contributed 37,689 GWH of electricity or 27.6% of the total power generated, making hydropower the biggest contributor to power generated in the country. It is followed by coal (20%), LNG (19%) and nuclear (11.4%).

Cost Per Unit of Electricity in Pakistan. Source: Arif Habib

Nuclear offers the lowest cost of fuel for electricity (one rupee per KWH) while furnace oil is the most expensive (Rs. 22.2 per KWH).

Pakistan Electric Power Generation Fuel MiX. Source: Arif Habib

Construction of 1,100 MW nuclear power reactor K2 unit in Karachi was completed by China National Nuclear Corporation in 2019, according to media reports. Fuel is being loaded in a similar reactor unit K3 which will add another 1,100 MW of nuclear power to the grid in 2022. Chinese Hualong One reactors being installed in Pakistan are based on improved Westinghouse AP1000 design which is far safer than Chernobyl and Fukushima plants.

The biggest and most important source of low-carbon energy in Pakistan is its hydroelectric power plants, followed by nuclear power. Pakistan ranked third in the world by adding nearly 2,500 MW of hydropower in 2018, according to Hydropower Status Report 2019. China added the most capacity with the installation of 8,540 megawatts, followed by Brazil (3,866 MW), Pakistan (2,487 MW), Turkey (1,085 MW), Angola (668 MW), Tajikistan (605 MW), Ecuador (556 MW), India (535 MW), Norway (419 MW) and Canada (401 MW).

New Installed Hydroelectric Power Capacity in 2018. Source: Hydroworld.com

Hydropower now makes up about 28% of the total installed capacity of 33,836 MW as of February, 2019. WAPDA reports contributing 25.63 billion units of hydroelectricity to the national grid during the year, “despite the fact that water flows in 2018 remained historically low.” This contribution “greatly helped the country in meeting electricity needs and lowering the electricity tariff for the consumers.”

Pakistan's Current Account Balance vs International Oil Prices. Source: Arif Habib

Recent history shows that Pakistan's current account deficits vary with international oil prices. Pakistan's trade deficits balloon with rising imported energy prices. One of the keys to managing external account balances lies in reducing the country's dependence on foreign oil and gas.

Pakistan Power Generation Fuel Mix. Source: Third Pole

It is true that Pakistan has relied on imported fossil fuels to generate electricity. The cost of these expensive imported fuels like furnace oil mainly used by independent power producers (IPPs) has been and continues to be a major contributor to the "exaggerated external demand driven by its rentier economy" referred to by Atif Mian in a recent tweet. However, Pakistan has recently been adding hydro, nuclear and indigenous coal-fired power plants to gradually reduce dependence on imported fossil fuels.

Saturday, August 1, 2020

Pakistan: Hopes Rise For Cheap and Abundant Electricity

Pakistani power sector is continuing its march toward cheap indigenous sources of electricity. Hydropower component has increased 22%, coal 57% and nuclear 8% while oil is down 54% and natural gas and LNG are down 32% and 15% respectively, according to Bloomberg. These changes in power mix are expected to help significantly reduce power subsidies that run into hundreds of billions of rupees contributing to large annual budget deficits.

Data From NEPRA. Courtesy Pakistan Today

Coal's contribution to power mix now stands at just 21%, in spite of 57% increase in use of coal in Fiscal Year 2020. It is still almost half of the global average of 38% of electricity produced from coal. Overall, the contribution of fossil fuels in electricity generation is now about 54%, down from nearly 66% a few years ago.

Pakistan Power Generation Mix. Source: Bloomberg

Hydropower and natural gas now contribute 32% each, making them the biggest sources of electricity in Pakistan. Coal comes next at 21%, followed by nuclear at 8%.

Pakistan Power Generation Plan 2019-2040. Courtesy of World Economic Forum

One of the biggest economic challenges Pakistan faces is it growing debt and deficit from subsidies to the power sector. Often referred to as "circular debt" in Pakistan, the government owes Rs. 1.6 trillion ($7.2 billion) to power sector at the end of June 2019. Pakistan government is now is committed to improving the situation by its development of an Indicative Generation Capacity Expansion Plan (IGCEP) that runs until 2040.

Change in Sources of Electricity in 2020. Source: Bloomberg

Pakistan recent efforts to diversify its fuel mix for cost reduction are raising hopes for cheap and abundant electricity needed for its industries and residential consumers. Already, the electricity generation cost is down 11% and current account deficit has declined 78%. There is a plan called "Indicative Generation Capacity Expansion Plan" in place. Execution is the key to making the power sector greener, cheaper and more reliable.

Fuel Mix For Power Generation in Pakistan. Source: Third Pole

Sunday, August 28, 2016

Pakistan's Thar Desert Riding CPEC Development Wave

Thar, one of the least developed regions of Pakistan, is seeing unprecedented development activity in energy and infrastructure projects. New roads, airports and buildings are being built along with coal mines and power plants. There are construction workers and machinery visible everywhere in the desert. Along with renewed hopes for the region and its people, development boom is also raising concerns about the environment and its impact on the residents.

Thar Coal Development. Photo Credit: Amar Guriro

Thar Development Projects:

The Tharparker District or simply the Thar Desert is located in the southeastern province of Sindh. It is receiving a lot of attention because the desert sands hide an estimated 175 billion tons of coal underneath.

In December 2015, China agreed to invest $1.2 billion to develop Thar coal and establish a 660 MW coal-fired power plant.

The coal deposits are divided into 12 blocks, each containing approximately 2 billion tons. In the first phase the Sindh provincial government has allocated block II to Pakistan's Sindh Engro Coal Mining Company (SECMC) to excavate 1.57 billion tons of coal and build a 660 megawatt power plant. The plant is expected to provide power to the Pakistani national grid by June 2019. Later expansion to produce 1,320 MW of power is also planned.

Muhammad Makki, a doctoral student at the University of Queensland in Australia, recently visited the region. Makki saw "signs of a resource boom already animating the dull landscape of the region – roads, airports, site offices, power lines, guest houses and rising real estate price are evident".

Thar Population:

The region has a population of 1.6 million. Most of the residents are cattle herders. Majority of them are Hindus. The area is home to 7 million cows, goats, sheep and camel. It provides more than half of the milk, meat and leather requirement of the province. Many residents live in poverty. They are vulnerable to recurring droughts. About a quarter of them live where the coal mines are being developed, according to a report in The Wire.

Hindu Woman Truck Driver in Thar, Pakistan. Source: Reuters

Some of them are now being employed in development projects. Makki saw an underground coal gasification pilot project near the town of Islamkot where "workers sourced from local communities rested their heads after long-hour shifts".

Hindu Woman Truck Driver in Thar, Pakistan. Source: Reuters

In the first phase, Sindh Engro Coal Mining Company (SECMC) is relocating 5 villages that are located in block II. SECMC is paying villagers for their homes and agricultural land.

SECMC’s chief executive officer, Shamsuddin Ahmed Shaikh, says his company "will construct model towns with all basic facilities including schools, healthcare, drinking water and filter plants and also allocate land for livestock grazing,” according to thethirdpole.net He says that the company is paying villagers above market prices for their land – Rs. 185,000 ($ 1,900) per acre.

Impact to Date:

Islamabad-based Pakistani economist Dr. Pervez Tahir recently visited and found that "the impact of the road, augmented by mobile connectivity, is multidimensional" Here's an excerpt of what he wrote in The Express Tribune:

"Walking long distances has given way to motorbikes and overloaded buses have taken the place of kekras, the rickety shuttle truck-bus of the World War II vintage. Children suffering from malnutrition and other ailments are reported directly to the media as well as the hospital in Mithi on mobile phones. The high numbers of the suffering children had always existed; only the media was late in discovering these cases. The media attention did bring politicians and bureaucrats to the region, facilitated of course by the road. The hospital in Mithi is now much better staffed and well-stocked with medicines. It is now a thriving town with a good number of schools and a college. Even an English-medium private school was in evidence. A sub-campus of a university is also coming up. Locals complained about the lack of girls schools, especially at the post-primary level. This is a sign of growing awareness. There was also frustration that the locals are not given the party tickets for the National and Provincial assembly seats. Mobile connectivity and the road have linked the famous craftswomen of Thar with the main markets much more effectively. At a community meeting in Islam Kot, women were quoting prices that broadly corresponded with the prices charged in Karachi’s Zeb un Nisa Street."

Summary:

Thar development boom is part of Pakistan's efforts to solve its energy crisis as part of China-Pakistan Economic Corridor (CPEC) projects. It is stimulating a lot of economic activity in Tharparker region that will impact the local population and the environment. Sindh government and the companies working there claim that they are trying to maximize benefits for the region and the country while mitigating any problems associated with it. It's important that they live up to their claims.

Here's a video report by Amar Guriro:

https://vimeo.com/179874726

Pakistan’s coal expansion brings misery to villagers in Thar desert from thethirdpole on Vimeo.

Related Links:

Haq's Musings

Thar Drought

China-Pakistan Economic Corridor

Abundant, Cheap Coal Electricity For Pakistan

Mobile Connectivity in Pakistan

Pakistan Sees Robust Growth in Consumption of Energy, Cement and Steel

Politcal Stability Returns to Pakistan

Auto and Cement Demand Growth in Pakistan

Pakistan's Red Hot Air Travel Market

China-Pakistan Economic Corridor FDI

Mobile Broadband Subscriptions and Smartphone Sales

Pakistan in MSCI Emerging Market Index

Tuesday, April 20, 2010

Abundant, Cheap Coal Electricity For Pakistan

Coal is the cheapest and the most common fuel used directly or indirectly to produce electricity and heat in the world today. Global coal consumption was about 6.7 billion tons in 2006 and is expected to increase 48% to 9.98 billion tons by 2030, according to the US Energy Information Administration (EIA). China produced 2.38 billion tons in 2006. India produced about 447.3 million tons and Pakistan mined only about 8 million tons in 2006. 68.7% of China's electricity comes from coal. The United States consumes about 14% of the world total, using 90% of it for generation of electricity. The U.S. coal-fired plants have over 300 GW of capacity.

Thar desert region in Pakistan is endowed with one of the largest coal reserves in the world. Discovered in early 1990s, the Thar coal has not yet been developed to produce usable energy. With the devastating increases in imported oil bill and the growing shortages of gas and electricity in the country, the coal development is finally beginning to get the attention it deserves. Coal contributes about 20% of the worldwide greenhouse gas emissions but it is the cheapest fuel available, according to Pew Center on Global Climate Change. It can provide usable energy at a cost of between $1 and $2 per MMBtu compared to $6 to $12 per MMBtu for oil and natural gas, and coal prices are relatively stable. Coal is inherently higher-polluting and more carbon-intensive than other energy alternatives. However, coal is so inexpensive that one can spend quite a bit on pollution control and still maintain coal’s competitive position.

At the end of the decade of 1990s when the economy was stagnant, Pakistan had about 1200 MW excess capacity. Between 2000 and 2008, the electricity demand from industries and consumers grew dramatically with the rapid economic expansion that more than doubled the nation's GDP from $60 billion to $170 billion. The Musharraf government added about 3500 MW of capacity during this period which still left a gap of over 1500 MW by 2008. The economy has since slowed to a crawl, the electricity demand has decreased, and yet the nation is suffering the worst ever power outages in the history of Pakistan. As discussed in an earlier post, Pakistan's current installed capacity is around 18,500 MW, of which around 20% is hydroelectric. Much of the rest is thermal, fueled primarily by gas and oil. Pakistan Electric Power Company PEPCO blames independent power producers (IPPs) for the electricity crisis, as they have only been able to give PEPCO much less than the 5,800 MW of confirmed capacity. Most of the power plants in the country are operating well below installed capacity because the operators are not being paid enough to buy fuel. Circular debt owed to the power producers and oil companies is currently believed to be largely responsible for severe load shedding affecting most of the nation.

The circular debt has assumed alarming portions since 2008, resulting in the current severe power problems. Former finance minister Saukat Tarin recently told the News that “in real terms the circular debt has swelled to Rs108 billion which mainly includes non-payment of Rs42 billion by KESC, Rs21 billion by the government of Sindh and Rs15-16 billion from commercial consumers to the Pakistan Electric Power Company (Pepco)". Just prior to leaving office, Tarin decided to raise Rs. 25 billion as a small step toward settling the swelling unpaid bills owed to power producers.

Per capita energy consumption in Pakistan is estimated at 14.2 million Btu, which is much higher than Bangladesh's 5 million BTUs per capita but slightly less than India's 15.9 million BTU per capita energy consumption. South Asia's per capita energy consumption is only a fraction of other industrializing economies in Asia region such as China (56.2 million BTU), Thailand (58 million BTU) and Malaysia (104 million BTU), according to the US Dept of Energy 2006 report. To put it in perspective, the world average per capita energy use is about 65 million BTUs and the average American consumes 352 million BTUs. With 40% of the Pakistani households that have yet to receive electricity, and only 18% of the households that have access to pipeline gas, the energy sector is expected to play a critical role in economic and social development. With this growth comes higher energy consumption and stronger pressures on the country’s energy resources. At present, natural gas and oil supply the bulk (80 percent) of Pakistan’s energy needs. However, the consumption of those energy sources vastly exceeds the supply. For instance, Pakistan currently produces only 18.3 percent of the oil it consumes, fostering a dependency on imports that places considerable strain on the country’s financial position. On the other hand, hydro and coal are perhaps underutilized today, as Pakistan has ample potential supplies of both.

The country's creaky and outdated electricity infrastructure loses over 30 percent, some of it due to rampant power theft, of generated power in transit, more than seven times the losses of a well-run system, according to the Asian Development Bank and the World Bank; and a lack of spare high-voltage grid capacity limits the transmission of power from hydroelectric plants in the north to make up for shortfalls in the south.

It does seem that Pakistan is finally getting serious about utilizing its vast coal resources to produce electricity and gas. Talking recently with GeoTV's Hamid Mir, Pepco Managing Director Tahir Basharat Cheema shared the following list of coal projects being launched:

1. The Sind Government has awarded a 1200 MW project to extract Thar coal and produce electricity to Engro Power.

2. A similar 1200 MW project is being undertaken by Pepco in Thar. The Pepco project also includes a 700 Km transmission line to connect Thar plants with the national grid.

3. An experimental project for underground coal gasification is being built by Pakistani nuclear scientist Dr. Mubarakmand to tap underground coal to produce 50 MW.

4. Another experimental 50 MW project using pressure coal gasification is planned by Pepco.

The coal and various renewable energy projects are expected to be online in the next 2 to 5 years. If these projects do succeed and more investors are attracted to the power sector, then Pakistan has the potential to produce about 100,000 MW a year for a century or longer. But these efforts will not help in the short or immediate term. What is urgently needed is decisive action to resolve the circular debt problems and restore power generation to full installed capacity immediately.

Here is a video clip of former president General Musharraf talking about the worst ever load shedding being faced by Pakistanis today:

Saturday, April 4, 2009

Pakistan Pursues Hydroelectric Projects

Pakistan and Germany have initiated serious discussions of German funding of eight ongoing and new hydropower projects worth billions of dollars. These talks are taking place in Islamabad between visiting German Minister for Economic Co-operation and Development Ms. Heidemaire Wiegoreak Zeul and Pakistani Prime Minister's Adviser on Finance Mr. Shaukat Tarin, according Business Recorder newspaper.

The projects currently under discussion include 621 MW Palas hydropower project, 567 MW Spat Gah hydropower project, 28 MW Basho hydropower project, 33 MW Harpo hydropower project, 70 MW Lawi hydropower project, Naigaj hydropower project and 300 KW Hingol hydropower project, 43 KW Kurram Tangi Dam. As a start, the German Economic Minister said her country had already committed finances for Keyal Khwar hydropower project located in NWFP on river Indus at Dasu. The project would generate 130 MW power. The focus of many of these development projects are the rural areas in the North West Frontier Province and the least developed federally administered tribal areas of the country affected by insurgencies.

Ms. Heidemaire Wiegoreak Zeul said that Germany was part of Friends of Democratic Pakistan (FoDP) and she had come here for the assessment of the situation and development needs to be discussed at Tokyo in April 17 and then again at the end of April during the annual meeting of the World Bank and IMF. She added that this support was important for Pakistan's development to stabilize the country and the region.

In addition to megaprojects such as 1000 MW Neelum-Jhelum hydropower project, a number of community-based micro hydro projects are being executed with the help of the Agha Khan Foundation in Pakistan's Northern Areas and NWFP. Within this region, out of a total of 137 micro-hydro plants, the AKRSP has established 28 micro-hydros with an installed capacity of 619kW. Initially, in 1986, these plants started as research and demonstration units. These projects were extended to Village Organizations (VOs) and became participatory projects. A Village Organization (VO) is a body of villagers who have organized themselves around a common interest.

After formation, each village organization signed a partnership with AKRSP to abide by all terms and conditions necessary for the village development. The entire responsibility of implementation was passed on to the VOs. AKRSP provided the negotiated cost of the plants and technical input required during the construction period. All the VOs completed the civil work of the plants. They purchased and transported machinery from other parts of Pakistan. The VO members provided subsidized or free unskilled labour and locally produced building material.

South Asia Hydropower Potential Source: Economist Magazine

Pakistan's current installed capacity is around 19,845 MW, of which around 20% is hydroelectric. Much of the rest is thermal, fueled primarily by gas and oil. Per capita energy consumption of the country is estimated at 14 million Btu, which is about the same as India's but only a fraction of other industrializing economies in the region such as Thailand and Malaysia, according to the US Dept of Energy 2006 report. To put it in perspective, the world average per capita energy use is about 65 million BTUs and the average American consumes 352 million BTUs.

The electric power situation in India is not much better. The country is suffering its worst electricity crisis and it has become a key election issue in states like Karnataka and Maharashtra. Some major cities in India are facing alarming situations; continuous load shedding in Bangalore has led to diesel shortage as people are using diesel generators to deal with the crisis. Maharashtra, Uttar Pradesh, West Bengal and Haryana are the worst hit by the ongoing crisis and they are facing power gaps of about 5,000MW, 1,000MW, 2000MW, 1,500MW respectively. In Maharashtra, state officials are asking industrial consumers to lower their demand by 10% or be ready to face forced load shedding (rolling blackouts). Cities and towns are facing 7 to 13 hours blackouts.

With 40% of the Pakistani households that have yet to receive electricity, and only 18% of the households that have access to pipeline gas, the energy sector is expected to play a critical role in economic and social development. With this growth comes higher energy consumption and stronger pressures on the country’s energy resources. At present, natural gas and oil supply the bulk (80 percent) of Pakistan’s energy needs. However, the consumption of those energy sources vastly exceeds the supply. For instance, Pakistan currently produces only 18.3 percent of the oil it consumes, fostering a dependency on expensive, imported oil that places considerable strain on the country’s financial position, creating growing budget and trade deficits. On the other hand, renewable energyfrom hydro, wind and solar are perhaps underutilized and underdeveloped today, as Pakistan has ample potential to exploit these resources.

Pakistan has vast reserves of coal. But there is very little energy produced by burning coal. China has now agreed to invest about $600 million for setting up an integrated coal mining-cum-power project in Sindh. The project will produce 180 million tons of coal per year, which is sufficient to fuel the proposed 405 MW power plant. Pakistan is currently world's seventh largest coal-producing country, with coal reserves of more than 185 billion tons (second in the world after U.S.A.'s 247 billion tons). Almost all (99 percent) of Pakistan's coal reserves are found in the province of Sindh. Pakistan's largest coal field is Thar coal field which is spread over an area of 9100 square kilometers, and contains 175 billion tons of coal. So far this coal field has not been developed but efforts are underway.

In addition to the coal project, China has agreed to build several other power plants in Pakistan to help the South Asian nation deal with its worsening electricity crisis. When completed over the next several years, these plants, including Nandipur (425 MW, Thermal), Guddu(800 MW, Thermal) and Neelam-Jhelum(1000 MW, Hydro), Chashma (1200 MW, Nuclear) will add more than 3000 MW of power generating capacity for the energy-hungry country. Pakistan is currently facing a deficit of 4,000 to 5,000 megawatts, resulting in extensive load-shedding (rolling blackouts) of several hours a day.

China has already installed a 325-megawatt nuclear power plant (C1) at Chashma and is currently working on another (C2) of the same capacity that is expected to be online by 2010. The agreements for C3 and C4 have also been signed. The United States has objected to China supplying C3 and C4 on the grounds that any Pak-China nuclear cooperation would require consensus approval by the NSG, of which China is now a member, for any exception to the guidelines. The US is applying double standards since it supported and got approval for such an exception from NSG for its own nuclear deal with India.

Beyond the power generation capacity expansion projects, Pakistan must also pay attention to modernizing its national grid. The country's creaky and outdated electricity infrastructure loses over 30 percent of generated power in transit, more than seven times the losses of a well-run system, according to the Asian Development Bank and the World Bank; and a lack of spare high-voltage grid capacity limits the transmission of power from hydroelectric plants in the north to make up for shortfalls in the south.

The current power crisis has given a significant impetus for serious efforts to develop a series of power projects. With so many projects in the pipeline, it can be expected that there is relief on the way for the electricity deprived nation in not too distant a future. In rural areas in particular, Pakistan has a better chance of meeting the UN Millennium Development Goals by building infrastructure projects and providing energy and water for development.

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