Fuel for Power Plants


Surely, it’s a little late for the ministry of energy to address the issue of fuel shortage in some power plants in time to ensure uninterrupted power supply during Ramazan. Already, there are reports of unscheduled load shedding throughout the country, which means it didn’t take long for the government’s claims to the contrary to ring very hollow.

And directing concerned departments to ensure necessary funds in a hurry might make good headlines, but things are rarely so easily handled on the ground. To add to the financial troubles, it’s been learnt that electricity demand has jumped about 45 percent year-on-year this April; hence the shortage in some plants. The temperature has also shot up earlier than expected this year, putting more upward pressure on demand at a time when the fuel position of some plants is severely compromised.

Things have actually got to the point that the National Power Control Centre (NPCC) has informed the ministry that operations of power plants will simply cease if required fuel is not made available immediately.

So it’s now apparently been decided that NPCC will provide the daily fuel requirement of each power plant to the Central Power Purchasing Agency-Guaranteed (CPPA-G) and Pakistan State Oil (PSO) till the end of the month.

That way CPPA-G will release funds to PSO which will then supply fuel to the plants. But since resources are scarce and this crisis must be resolved in time to make sure there isn’t any more unpleasantness during Ramazan, it’s also been decided to supply plants with depleted stocks from plants with surplus stocks; which makes sense under the circumstances.

One big reason for this problem is the government’s refusal to admit that one exists to begin with. Even recently, as there were reports of unusually long, unscheduled loadshedding up and down the country, especially in northern areas, the energy minister brushed aside all criticism by simply tweeting that there was no such thing. It’s another matter, of course, that day long power outages led to protests in areas like Chitral and even Peshawar.

The main issue then, as now, was lack of adequate fuel with power plants. Usually, they keep buffer stocks to meet sudden surge in demand, as is happening now, but depart from the practice whenever the government is unable to clear due contractual payments, because then the plants are unable to make required purchases in advance. Just last week CPPA-G told the government about financial problems arising from low recoveries from Discos (distribution companies) and asked for Rs150bn to clear overdue payments, but was given only Rs50bn.

Now, Director General Oil has said that fuel shortfall at plants would have a direct impact on the entire power sector, especially since a surge in demand for petroleum products is expected from April to June 2022; and it will be very difficult to meet unless funds are paid to PSO to reduce receivables.

These receivables have grown to around Rs84 billion which, after adding almost another Rs84b in Late Payment Surcharge (LPS), amount to a grand total of Rs167.3b. But he’s requested the power division to ensure payment of only Rs25bn by April 15 so the supplier can at least avoid default; so cramped is the state of affairs as the government struggles to honour its word of keeping the lights on during Ramazan.

It’s unfortunate that the PTI (Pakistan Tehreek-e-Insaf) government is leaving the power sector more or less how it found it; in a state of acute disarray. And just like its predecessors, it could only watch from the side as different links in the financial chain just failed to hold it together and the circular debt kept soaring. Considering how things have been, it’s a small miracle already that the power situation is not much worse in the holy month.

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