1. The current government has now been in power for over four months. How do you see Pakistan evolving under the PTI government?
At the beginning of my mandate, we had a balance of payment crisis and energy crisis in Pakistan and within these past 5 months, we have been trying to improve a stalled economy. Secondly, in the energy sector we had a build-up of circular debt, the government was not able to recover the price at which it produced and sold electricity to the Pakistani people because of electricity theft, line losses and inadequate collection mechanisms at the ground level and due to the creaking old inefficient system of distribution companies.
2. Congratulations on your new role as Minister of Energy, what are the objectives of your ministry for 2019?
We are now rationalizing the tariff structure and passing on the oil price increase or decrease directly to the customer. We have also ring fenced low income groups consumer base so they are not affected by electricity price increases, these are people who consume 300 units or below of electricity and make-up 75% of the domestic consumer base. Alternatively, we have loaded the price increases on the well-off which represent 25% of the population. When the price on the tariff went up, the low-income stature and 95% of small businesses were unaffected.
Coming over to the export oriented industry; we gave them an incentive so that their electricity prices per unit would be caped at 7.5 cents in order for them to become more competitive. For the farmers, we announced that their tube well prices will not be more than rupees 5.70 per unit. Similarly we have the industrial support package of three rupees per unit. If we increased the electricity prices as recommended by the regulator, the prices would have gone up by rupees 3.86 per unit and that would have escalated into a lot of the inflation and put a lot of burden on the poor segment of the society but we protected them and only increased prices by rupees 1.27 per unit.
On the other hand, we are funding subsidies given to industries by increasing the collection from our own receivable accounts which is money owed to electricity companies by the consumers. Our target is to recover around 150 billion rupees for this year as the circular debt has mounted to 806 billion rupees. Our previous government gave electricity to all the areas where there is theft and no collections mechanisms which resulted in an increased burden on the power companies’ balance sheets. The receivable cycle blew up and during one year, no collections were made and that added 450 billion rupees of debt in the power segment with the total coming up to 806 billion rupees. My ministry’s goal is to reduce this debt to 200 billion rupees by December 31st 2019. We have also started a campaign against electricity thieves and officials within the power sector itself. We have arrested over 1600 power thieves, registered cases against 18.000 people and sacked 400 officials in the last 4 months. We are running this campaign 24/7 to reduce line loses.
The previous government’s focus shifted from renewable or indigenous resources to importing more energy. If you look at Pakistan’s power system, it is distributed between generation, transmission and distribution. When we talk about generation; 60% of our generated energy comes from fossil fuels which is imported, it means that supply lines are strict, freight payments are being made and most importantly foreign exchange reserves are getting out of the country, so the cost of production of electricity goes up.
This system is directly linked to oil prices and we want to change that. 60% of our energy is fossil fuel, 30% is hydro-power, 6% is nuclear and 4% is renewable energy. Our total electricity generation capacity is 31,000 megawatts and the derated capacity is 28,000 megawatts when everything is functioning. We need to attract local and foreign investments in the sector.
The previous government, unfortunately wanted to bring 4,000 megawatts of Liquid Natural Gas (LNG) into the country which resulted in the shut down of 102 renewable energy projects overnight. I have sent a summary to the cabinet committee on Energy to reopen those companies and we will be giving them a new tariff structure.
3. You have talked about the generation aspect, can you please explain us the transmission side?
Pakistan is a longitudinal country, there is hardly any redundancy in the energy line so if something happens to this line, we are effectively cut off. To prevent that, we are going to put in alternate lines in Northern and Southern regions of the country. Some billion dollar project are on the pipeline from a transmission standpoint. Another important factor to realize is that we have the river Indus on the easterners side of the country, on the western side there is Quetta Electric Supply Corporation and on top of that is the Peshawar Electric Supply Corporation, these two companies are basically two provinces, they will be cut into smaller units for the people to benefit. We have started investing into technology and we have been focusing on developing an Automatic Metering Infrastructure (AMI). AMI is an architecture for automated, two-way communication between a smart utility meter with an IP address and a utility company. The goal of an AMI is to provide utility companies with real-time data about power consumption and allow customers to make informed choices about energy usage based on the price at the time of use. All of this Meta data will be integrated with an artificial intelligence component in order to detect theft immediately. The size of the market on the distribution side is close to 7 billion dollars, we
are currently investing 1.5 billion dollars in that segment and have received financing from various multinational donors.
Another important factor is that Pakistan is a single buyer market, which means that Government has an agency called Central Power Purchasing Agency (CPPA),that purchases energy from all the generators, which it distributes and sells, to all households and companies. We want to have a multi-seller and buyer market where we can generate electricity, put it on a transmission line, pay toll to the transmission line company and take it to the customer whenever required. We want to issue transmission licenses to each
one of these companies so that people use the infrastructure. We are adding incremental energy so that we have enough energy reserves, which should be dependable, indigenous and better energy.
4. You will announce a new alternative power policy in March 2019. Can you please give us some insight into this new policy?
We are bringing in a new renewable energy policy by March 2019 so our target is to bring renewable energy production up to 20% of our energy mix by 2025 and to 30% by 2030. We are forecasting that by 2030, our generation capacity will be approximately 55,000 megawatts. Solar energy costs are coming down, they stand at 4.5 cents per unit and they will come down to 1 cent in the near future. There is a paradigm shift going on in the energy sector. We have two agencies dealing with investors coming into Pakistan, one is the Public Private Infrastructural Board (PPIB) and the other is the Alternate Energy Development Board (AEDB). We want to digitize both of these organizations to simplify the process for foreign investors. The website will confirm if they fulfill the set criteria, if so, they will be rewarded with an energy license for a specific period of time. Competitive bidding is another structure we have put in place in order for the market to open up.
5. According to the World Energy Outlook statistics (2016), at least 51 million people in Pakistan, representing 27% of the population live without access to electricity and 105 million people are still relying on traditional use of Biomass. Pakistan’s electricity generation has increased over time but there are still many power-cuts. How is the government planning to tackle this issue and to electrify the rural areas? What major projects will increase the production of electricity?
We are pushing for distributed generation in rural areas, we have our own generation system and four types of energy; they just need to be distributed properly, deregulating the market is a possible option. We are also extending the grids in order for more people to have access to electricity. Bio mass is a very small component of electricity generation and is part of the renewable energy matrix.
6. You said that: “Chinese investors are closely following Pakistan’s power sector policies and are keen to invest in renewable energy”. How can Pakistan attract foreign investors in renewable energy projects? Is there room for private-public partnerships?
Our renewable energy policy, which is coming up soon, will allow the energy market to open up. There will be room for public-private partnership and for 100% foreign owned companies to invest in Pakistan. There are 102 companies in the alternate energy development board, which are going to start working immediately. There is going to be a lot of movement in the renewable energy market as well as hydroelectricity. We are starting large projects in this field, such as the Karot Hydropower project which
is an under construction run-of-river concrete-core rock-fill gravity dam in Pakistan with an installed capacity of 720 MW and the Kohala Hydropower Project is a proposed run-of-the-river, high head project of 316 meters that will be located near Kohala, in Azad Kashmir and will have an installed capacity of about 1000 Megawatts.
7. After being a member of the National Assembly and serving as Minister of State for Finance in the Federal Cabinet from 2004 to 2007. What does it feel like to be Minister of Energy of Pakistan? What do you feel most proud of?
It is a very big challenge and an honor to be the Minister of Energy of Pakistan. I have served as Minister of State for Finance in the Federal Cabinet from 2004 to 2007 and as part of the World Economic Forum 2006 – 2007.
I keep telling the people that this is the time that our country is taking off economically and I will give you reasons why. Being a student of Economics and Finance, the country has overseen an important increase in land valuation, especially near the big cities, it has given buying power to a whole range of people and they consume products manufactured within Pakistan. As such, the industrial activity is taking off and estimated put our formal economy at 300 Billion US Dollars. For a developed country the size of the informal economy is approximately 15% of the GDP while it is 50%-80% for a developing economy,
this has to be taken into calculation when it comes to energy demands. Even when we had a rough patch, our economic growth rate was higher than most countries and now as the economy is taking off, the demand factor is going to go up very fast.
Tourism is another area with great potential. All of us realize that this is another revenue generator with a lot of economic activity around it. We have investment coming in from the Middle East, China, the USA and many other countries in this sector. Investors are developing an interest in the northern areas.
8. What is your final message to the readers of USA Today who consider Pakistan as a potential investment destination?
Come and visit Pakistan; see the beauty and look at investment opportunities as they unmatched anywhere else in the world. The energy sector is an especially good sector to invest in, as it is the fuel tank of the economy. It is a very open, well-regulated sector and will get very competitive in the near future.