Power Ministry Refutes KfW Report

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ISLAMABAD, Mar 7 (Muzaffargarh.City – 07th Mar, 2017 ) : The Ministry of Water and Power Tuesday contradicted the KfW’s report which appeared in a section of press and termed it without due research and lacking professional competence.

In a statement issued here, the ministry expressed its deep concern over the way some analyst at KfW, a lending agency, has rushed to refute, rather scandalize, the claims in the advertisement of the ministry published last week.

“We reiterate the claims in the advertisement and invite any analyst or reporter to interact with the ministry and verify the claims in the advertisement of having achieved better fuel efficiency and of turning losses into profits,” it said.

“We take pride in the improved performance which has resulted in lowering the losses to the exchequer by reducing pilferage, better management and efficient use of the generating capacity by strict enforcement of merit order generation,” it added.

It could not be claimed that the multifarious problems, inefficiencies and malpractice in the power sector had disappeared overnight. All progress has to be incremental and should only be judged in comparison with the past.

Two facts were reported in the said advertisement: The generation from government owned generation units have increased by 25% since 2013, and the losses of around Rs 7.7 billion in 2013 had been overcome and turned into profits amounting to Rs 5.7 billion in 2016.

It was mentioned in the said advertisement that it was made possible by better performance in terms of efficient use of fuel and better controls. While none of the figures reported by the ministry have been refuted in the report, the performance of the ministry has been attempted to be tainted with conjectures and twisted analysis.

The language used in the report and the fact that it was prepared and released to media in an indecent haste, create doubts about the intention of its writer(s), the statement said. KfW neither ascertained the authenticity of facts nor discussed any of its findings with the ministry, which is the norm with the development lending agencies, before they finalize any report.

Any objective analysis of the ministry’s claims in the advertisement of “turning losses into profits” through “efficient fuel consumption and better controls” would have required two basic queries to be answered– whether the consumption of fuel had decreased for the same amount of generation and how the losses had been converted into profits by the generation companies.

A professional probe by the report writer(s) would have got them the data which would have shown that the Muzaffargarh plant, which was rehabilitated in 2013 with technically improved efficiency, could not achieve its financial benefits in the coming years till 2015, where the administrative controls and monitoring had improved its profitability by reducing overall losses.

They would have come to know of the digitized fuel receipt and inventory system installed at Muzaffargarh plant, which had reduced the chances of the theft of oil which used to be the scandal for the past many years.

They would have realized how this had hurt interest of the mafia which used to earn billions from this organized theft. The claims of success on that account by the ministry hits into the heart of that mafia.

The claim that the increase largely came in Muzaffargarh figures due to inclusion of Nandipur plant was also incorrect. The data proves that Muzaffargarh plant generated 4.311 GWh in 2014-15 and 4.645 GWh in 2015-16 thus registering an increase of 7.7 5% from its aging units.

The generation at Muzaffargarh in 2014-15 consumed 1,285,556 metric tons of oil and would have required 1,384,210 metric tons of oil for the increased generation in 2015-16, had the fuel consumption efficiencies not improved and pilferage not checked.

However, this higher generation was achieved while consuming only 1,285,130 metric tons. Thus a massive saving of 99,079 metric tons was achieved in a year, amounting to Rs 3.28 billion, reducing import of around 1.5 ships of oil load (saving approx.

$ 31 million in imports). This is how greater efficiencies and reduction in losses were achieved as claimed in the advertisement. The report fails to reach into the depth of these matters. In any given power generation regime, the operator has to run maximum capacity in peak hours and to reduce it in non-peak hours.

Such reduction in generation, in any efficient system must come by closing plants with high generation costs. The older GENCO plants being on the lower end of the efficiency chart, are thus shut down for more hours than the efficient plants.

The fact that these plants have still achieved an increase in the overall generation by 25%, was due to the fact that the overall load-shedding was brought down from 12 to 15 hours in 2013 to 3 to 4 hours by the end of 2016.

The use of less efficient plants would further reduce in the coming years after induction of more efficient plants in 2017 and 2018. It would further improve basket price for the consumers. It is due to strict observation of merit order dispatch system by NPCC that power consumers were still being provided Rs 2 to Rs 3 per unit in fuel price adjustment every month, despite rising oil prices since past one year, having jumped from US$ 30 per barrel in January 2016 to now US$ 53.

In the advertisement, the ministry never claimed that increase in generation was owing to power plants initiated by the present government. The Nandipur power project was initiated in 2005, turned sick and remained stalled till 2013 and the incumbent government completed in 2015.

Hence such criticism in the report was unnecessary and irrelevant to the context of the ministry’s advertisement. The report confuses generation with efficiency when it says “achieving generation efficiency as high as 25% is applauding indeed”.

The ministry in its advertisement had not claimed achieving 25% efficiency, which is higher in overall generation mix of GENCOs, the advertisement claimed increase in generation by 25%. The history of the power sector is changing as the government owned generation companies are coming out of losses, for the first time in many years.

The distribution companies have successfully reduced their AT&C losses by 5.2% again for the first time in the history of power sector. The transmission system, constrained to only 15,600 MW, transmitted 17,540 MW in 2016, when 85% of the total available capacity was dispatched.

There is a turnaround in all spheres of power sector and we hope to sustain these achievements in future as well.