The National Power Policy 2013 envisaged a complete elimination of the energy shortfall by the end of 2017. However, just a few months later, the government admitted that it was not possible to achieve the target.

The policy also aimed at inexpensive and affordable electricity for short-term and medium-term needs. Conversely, the government has revived the expensive, oil-based 425MW Nandipur thermal power project, costing Rs57.38bn. And it now plans to sign a contract with the same supplier for constructing the 525MW Chichoki Mallian power plant, to be based on diesel and/or furnace oil.

While the policy assures merit-based appointments of professionals at the helm of power sector affairs, bureaucrats have been given positions of the secretary of water and power, chairman WAPDA, managing director Private Power and Infrastructure Board (PPIB), chief executive Gadani Power Park etc.

The government also seems to have reneged on its policy to develop power projects based on indigenous hydro and coal resources. Instead, almost all the planned coal-based power projects, of a cumulative capacity of over 16,000MW, would use imported coal.

Under the policy, the existing average tariff of over 12 cents per kWh was to be reduced to less than 10 cents (mix generation). In June 2013, Nepra had announced an upfront tariff, levelised for a project’s life, in the range of 8.2-9.6 cents, 7.7-9.2 cents and 7.4-8.75 cents (foreign financing-local financing) per unit for 200MW, 600MW and 1,000MW projects, respectively. The government notified in September 2013 that these were to be based on imported coal.

Surprisingly, the government later asked Nepra to revise the upfront tariff upwards. Consequently, the power regulator set upfront tariffs of 8.6417-9.6774 cents, 8.3601-9.5422 cents and 8.0189-9.1198 cents for 220MW, 660MW and 1,099MW projects respectively this June. This would result in a higher cost of power generation for independent power producers (IPPs), and a higher unit cost of electricity for consumers. Our electricity tariff is already the highest in the region.

History is likely to repeat itself as the government has not learnt lessons from the past. In realising the Power Policy 2013, same mistakes as those that were observed during the implementation of the first power policy introduced in 1994 are being made all over again.

The shortcomings in the implementation of the Power Policy 1994 were the root cause of the prevalent energy crisis. The policy’s focus was on thermal, furnace oil-based power plants, which turned out to be the most expensive in a few years. Again, compared globally, the tariff offered to investors was much higher. Excessive financial and fiscal benefits were also extended to investors.

Surplus power, disproportionate to future demand, was contracted, resulting in excess installed capacity for many years. Unfortunately, the contracts were not finalised in a transparent manner, and the selected projects were subject to political influences. The selection of the location, fuel and technology was also left to the choice of the investor, resulting in inefficient technologies. Indigenisation of power plant machinery and equipment was not promoted.

The government has not taken care of any of these elements, which cast a shadow on the success of the Power Policy 2013. It has set out to achieve over 21,000MW of grid-connected power by 2017, whereas projects of around 20,000MW are in the pipeline, to be completed by 2025. Hydropower projects of 19,373MW have been launched by Wapda, while IPPs would add around 17,300MW power to the national grid during 2016-2022.

Wind power projects of 2,726MW are scheduled for completion by 2017, while work is in progress on nuclear power projects of 4,455MW, to be on line by 2020. This would result in excess power generation capacity, and the policy says that surplus electricity by 2019 would be regionally traded. This is indeed laughable, as we are importing electricity from Iran, whereas plans are underway to get it from India and the Central Asian republics.

Massive expansion of capacity is envisaged through imported coal. Under the China Pak Economic Corridor, 22 mega power projects are to be implemented in the private sector, at a total cost of $27.3bn. Those based on imported coal include Gadani Power Park of 6,600MW cumulative installed capacity, Sahiwal power project of 1,260MW and Port Qasim project (two plants of 660MW each).

Punjab has launched various imported coal-based projects of 660MW and 55MW, with a cumulative capacity of 6,110MW. K Electric, Hubco, Saba and Nishat group are converting their existing residual fuel oil-based power plants of 2,153MW to imported coal. A number of captive power plants using imported coal are also being planned.

This would mean dependence on fluctuating international coal prices, insecure fuel supply, and constant drain of foreign exchange. Restrictive regulatory changes have taken place in coal exporting countries like Australia and Indonesia.

The question is, why not use 185bn tonnes of indigenous coal reserves for power generation? Today, the government claims coal-based electricity is at an affordable price, but, eventually, the situation could change. Likewise, enormous concessions and benefits have been extended to prospective investors, ensuring an unprecedented 26.5pc return on equity in dollar terms.

The most disturbing factor is that projects whose investors opt for upfront tariff shall be processed as per the ‘Guidelines for setting up private power projects under short-term capacity addition initiative’ of August 2010. This allows the investor to use any location, fuel and technology.

Published in Dawn, Economic & Business, Aug 11th, 2014