Con­ver­sion is the key

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The new govern­ment of Prime Min­is­ter Nawaz Sharif aims to save bil­lions through con­vert­ing fur­nace oil­based power plants to coal-fu­elled units. This is ex­pected to ad­dress the is­sue of cir­cu­lar debt and also spare re­sources for upgra­da­tion of trans­mis­sion and dis­tri­bu­tion sys­tems in the power sec­tor.

Sav­ings will be made through the re­duc­tion of fur­nace oil im­ports, sav­ing $8.4 bil­lion by con­vert­ing 4,272 MW. Among the rea­sons for fi­nan­cial woes in the power sec­tor are high cost­ing fur­nace oil along with cor­rup­tion, in­com­pe­tence and the in­abil­ity to col­lect bills.

The in­tended con­ver­sion will take about 18 to 20 months, which aims at sav­ings of around Rs. 800 bil­lion from the con­ver­sion and it would ad­dress cir­cu­lar debt and trans­mis­sion and dis­tri­bu­tion sys­tems of the power sec­tor.

The steam-based ther­mal power plants are cur­rently pro­duc­ing elec­tric­ity from Rs. 15.5 per unit to Rs.23 per unit, against the aver­age power tar­iff of Rs.9 per unit. Se­nior PML-N leader Sar­taj Aziz says con­ver­sion will be of around two bil­lion dollars. How­ever, the de­bate cur­rently is more on which power plant should be given con­ver­sion pri­or­ity.

Thus far, SABA power an in­de­pen­dent power pro­ducer could be picked for con­ver­sion to coal due to the land avail­able at the plant site where the setup can be made. This coal plant will take up to six months to come into op­er­a­tion.

The fear of cor­rup­tion and in­com­pe­tence still looms over the pub­lic sec­tor power plants, and hence af­ter the coal con­ver­sion is made the govern­ment does not wish to hand it back to the old man­age­ment and wishes to take pre­cau­tion­ary steps through trans­parency and fair mech­a­nisms to run th­ese newly con­verted power plants so the de­ci­sions are not chal­lenged in court.

To this day, ex­perts point out that at least 3000MW of ther­mal power gen­er­a­tion ca­pac­ity re­mains idle due to the lack of funds. They have the ca­pac­ity to pro­duce up to 17,500 MW dur­ing the peak sum­mer sea­son.

They are also tak­ing into ac­count that coal power plants would have to be im­ported and since many of th­ese power plants and IPP’s are lo­cated 300 to five hun­dred miles from the sea, the cost of coal trans­porta­tion will also be taken into con­sid­er­a­tion.

The aim is to save money through con­ver­sion. The elec­tric­ity cost from th­ese plants will be low which will be trans­ferred to other parts of the coun­try through the national grid.

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