(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T01017R000302900001-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 6
• Document Creation Date: January 12, 2017
• Document Release Date: January 28, 2011
• Sequence Number: 1
• Publication Date: August 7, 1986
• Content Type: MEMO

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SUBJECT: Pakistan: Facing Electricity Shortages
NESA M# 86-20125
DISTRIBUTION:
EXTERNAL:
Orig - Deputy Assistant Secretary James Phillips (Commerce)
INTERNAL:
DCI/DDCI/Executive
DDI
NIO/NESA
D/NESA
DD/NESA
C/NESA/PPS
NESA/PPS
C/PES
CPAS/IMD/CB
PDB Staff
NID Staff
C/NESA/AI
C/NESA/PG
C/NESA/IA
C/NESA/SO
DC/NESA/SO
C/NESA/S0/P
C/NESA/SO/A
C/NESA/S0/S
DDI/NESA/%
(8Aug86)
DATE
Fit &-
DOC NO I~E~fF l'1 ~l~`oZ01~S
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Central Intelligence Agency
Washington. D. C. 20505
DIRECTORATE OF INTELLIGENCE
7 August 1986
Pakistan: Facing Electricity Shortages
Summary
Pakistan suffers from chronic electricity shortages.
Current generating capacity is only 85 percent of peak demand.
Frequent power outages during recent years, particularly during
the summer, have become commonplace. Heavily subsidized
electricity rates and extension of service to new areas have
contributed to rapid growth in demand for electricity.
Pakistan is attempting to alleviate the power shortages by
reducing subsidies, improving transmission efficiency,
instituting conservation measures, and adding additional
capacity. It has also announced a plan to allow private
investment for electricity generation in an attempt to increase
available investment funds. Even if all of these efforts come to
fruition, however, power shortages will probably continue well
Current generating capacity in Pakistan is 5,875 megawatts (mw),
roughly 1,000 mw below peak demand. Hydropower provides roughly 67 percent
of Pakistan's generating capacity, with thermal plants providing most of
the remainder. Pakistan has one nuclear power plant--built by Canada 15
years ago--which supplies less than 1 percent of capacity.
Demand for electricity--growing at approximately 11 percent
annually--has been outstripping capacity. As a result, loadshedding has
be:-jme common. In 1985 when a severe drought curtailed operations at
hydroelectric plants, the US Embassy in Islamabad reported power outages of
as much as 12 hours on many days. The situation has improved in 1986
because rainfall returned to normal and the recent drop in world oil prices
has allowed Pakistan to import more petroleum without adding to foreign
This memorandum was prepared at the request of Deputy Assistant
Secretary James Phillips, Department of Commerce, by
Pakistan/Bangladesh Branch, South Asia Division, Office of Near Eastern and
South Asian Analysis. Information as of 7 August 1986 was used in its
preparation. Questions and comments should be directed to Chief, South
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exchange outlays, enabling increased power generation from oil-fired
thermal plants. But Pakistani experts publicly predict that the shortfall
during peak demand periods will rise from the current 1,000 mw to 3,000 mw
by 1992, even if all currently planned power projects are implemented as
scheduled.
Reductions in Subsidies
Prior to electricity rate increases in 1985, the Asian Development
Bank reported that only 65 percent of Pakistan's Water and Power
Development Authority's (WAPDA) fuel costs were recovered in sales and that
only 40 percent of its investment was self financed. To reduce government
subsidies to WAPDA, Islamabad raised electricity rates by 10 percent for
residential customers and 55 percent for commercial and industrial
customers. A further across-the-board increase scheduled for 1986 has not
yet been implemented.
Given the drop in oil prices and substantial domestic opposition to
rate increases, we judge the government is unlikely to move on these
increases this year. During conversations with one Pakistani official, US
Embassy officials learned that there is even some sentiment within the
government for reducing electricity rates in response to the recent decline
in world oil prices. But we do not believe this is a widely held view.
Rate reductions are particularly unlikely because some aid donors are
pressuring Pakistan to further increase rates in an effort to encourage
conservation and to provide funds for energy projects. Some are
threatening to reduce funding for energy projects if Pakistan does not
comply.
Improving Distribution
one-third of generated
electricity is unaccounted for due to inadequacies of the distribution
system, malfunctioning meters, and theft of services. Much of the loss
results from a lack of trained personnel to repair broken equipment.
In response to these losses, WAPDA is upgrading its distribution
system. Approximately $125 million--nearly 25 percent of the energy
development budget--is being devoted to improving the transmission and
distribution system in the current fiscal year, according to official
'statistics. Plans call for the installation of a 680-mile, 500-kilovolt
NO transmission line between Lahore and Jamshoro. A second 500 kv line
is currently being constructed between Tarbela and Faisalabad WAPDA is
also trying to improve metering and billing practices.
Conservation Efforts
Besides increasing electricity rates, the World Bank reports that
Islamabad has instituted a number of programs designed to reduce peak
demand on the electrical system, including:
25X1
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--Staggering weekly holidays for businesses. Islamabad has required
some business to have their "weekends" during the week to smooth
demand for electricity.
--Asking for voluntary reductions in lighting loads in industry.
--A 50-percent reduction in street lighting.
--Requiring the closing of shops by sundown.
Planned Power Projects
Islamabad has three major power projects on the drawing board--one
hydro, one thermal, and one nuclear. In addition to funding uncertainties
caused by Islamabad's hesitation to implement donor recommended electricity
rate increases, each of the projects faces unique obstacles.
We believe the Lakhra thermal station is the most likely to begin
operation first--in 1991. WAPDA intends to construct the Lakhra plant of
approximately 500 mw. It would be fired by lignite mined from the Lakhra
coal field near Hyderabad in Sind Province. Plans call for the first 250
mw unit to be commissioned in September 1991 and the second a year later.
The power station will be designed and built under the direction of WAPDA;
the coal fields will be privately developed. Current plans call for joint
funding from the World Bank, the United States, and the Pakistani
Government. US Embassy reporting suggests some concern that the project
will not be cost efficient because of the low quality-- high ash and
sulpher content--of the coal.
The Kalabagh Dam will be a combined irrigation and power project in
Punjab Province about 120 miles downstream from the Tarbela Dam, the site
of a present hydroelectric facility in the North West Frontier Province
(NWFP). Plans call for Kalabagh to have an initial capacity of 1,200 mw
when it comes onstream in 1993 and another 1,200 mw would be added by 1995,
but we believe delays have already made the 1993 target date unrealistic.
The project has met with stiff political resistance in the NWFP, with
residents claiming that they will have their farm land flooded while most
of the electricity will be consumed by homes and businesses in Punjab
Province. According to press reports, members of the NWFP Provincial
Assembly are nearly unanimous in their opposition to the project.
The Chashma nuclear power plant was originally scheduled to be
operational by 1980 with a capacity of 900 mw, but Pakistan has been unable
to find any potential suppliers. France canceled an agreement to supply
the plant under pressure from the United States because of concerns that
the technology would be diverted to Pakistan's nuclear weapons program. In
the absence of international nuclear safeguards, Pakistan is unlike1 to
find a supplier for this or any other nuclear reactor.
Pakistan has planned include:
other energy projects
-3-
25X1
25X1
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--The Multan thermal power station, with three 210 mw units. An
agreement has been signed with the Soviet Union for this project.
--The Jamshoro thermal power station, with four 200-250 mw oil-fired
burners. An agreement has been signed with the Japanese for the
first of these units. WAPDA will likely offer tenders for the
other units soon.
Private-Sector Participation
Last year, Islamabad established conditions under which the private
sector would be invited to participate in power generation, according to
press reports. Under the plan, the Ministry of Water and Power would
decide on the location and capacity of a thermal station and then invite
bids from private- sector firms to install and operate it. Firms would be
required to submit bids detailing the minimum price they would be willing
to receive for the electricity generated. WAPDA would guarantee to
purchase a specific amount of electricity at a specific price rather than
the usual fixed rate of return. The firm would be required to meet at
least 25 percent of the project's costs from its own resources, excluding
loans and credits.
We believe this plan is unlikely to attract many firms. The large
investment required for the construction of a power station combined with
the absence of a guaranteed rate of return will likely discourage most
potential investors.
Outlook
The continuing rapid growth in electricity demand, combined with only
modest plans for additional capacity. ensures that power shortages will
worsen into the early 1990s. the Pakistani
Government estimates current losses in production due to electricity
shortages at $3 million per day and estimates that losses could reach $5
million per day by next year. Some business leaders have called this a
conservative estimate, according to press reports.
Although experiencing a temporary improvement this year, we expect
Pakistan's foreign payments position to worsen over the next few years, a
deterioration that may prompt Islamabad to delay imports of equipment
necessary to increase generating capacity in favor of food and raw
materials. This is a Catch-22 situation for Pakistan.
Loadshedding--estimated to have caused exports to be 9 to 13 percent lower
in 1985 than they otherwise would have been, 25X1
will become increasingly costly in terms of lost 25X1
production and foreign exchange earnings. 25X1
Islamabad's expressed willingness to allow private investment in
generating stations is unlikely to attract enough financing to
substantially add to capacity. Domestic firms are unlikely to have the
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expertise or the access to capital required for such investments. Foreign
firms, which would be unable to adjust electricity rates in response to
changes in costs or operating conditions without permission from a
bureaucracy notorious for foot dragging, are also unlikely to invest large
amounts in power stations.
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