Identifier
Created
Classification
Origin
09LAHORE164
2009-08-08 10:24:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Lahore
Cable title:  

POWER IN PUNJAB: LIMITED OPTIONS FOR ADDING SUPPLY,

Tags:  ECON EAID ECIN EINV ENRG ETRD PGOV PREL PK 
pdf how-to read a cable
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ZNR UUUUU ZZH
R 081024Z AUG 09
FM AMCONSUL LAHORE
TO RUEHC/SECSTATE WASHDC 4141
INFO RUEHIL/AMEMBASSY ISLAMABAD 4846
RUEHKP/AMCONSUL KARACHI 2126
RUEHPW/AMCONSUL PESHAWAR 1806
RUEHNE/AMEMBASSY NEW DELHI 0851
RUEHBUL/AMEMBASSY KABUL 0469
RUEHLO/AMEMBASSY LONDON 0179
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEHC/USAID WASHDC
RUEHLH/AMCONSUL LAHORE 5296
UNCLAS SECTION 01 OF 03 LAHORE 000164 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EAID ECIN EINV ENRG ETRD PGOV PREL PK
SUBJECT: POWER IN PUNJAB: LIMITED OPTIONS FOR ADDING SUPPLY,
OVERLOOKING EFFICIENCY

REF: A. A. LAHORE 154

B. B. ISLAMABAD 1724

UNCLAS SECTION 01 OF 03 LAHORE 000164

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EAID ECIN EINV ENRG ETRD PGOV PREL PK
SUBJECT: POWER IN PUNJAB: LIMITED OPTIONS FOR ADDING SUPPLY,
OVERLOOKING EFFICIENCY

REF: A. A. LAHORE 154

B. B. ISLAMABAD 1724


1. (SBU) Summary: The Punjab provincial government is
increasingly concerned about persistent rolling blackouts, but
has few options to respond to the electricity crisis. In a July
28 meeting with A/PO, son of the Chief Minister and Member of
the Provincial Assembly, Hamza Sharif, acknowledged the
necessity of the central government's three-point plan to meet
the energy crisis: installing short-term rentals, paying off the
"circular debt," and developing long-term power generation
projects. Punjab officials said they have several small
electricity generation projects under way, but most power
projects (including all private sector power projects over 50
MW) are in the federal domain, and the provincial bureaucracy
lacks the skills to drive such programs. Even if the province
had the funds and the expertise, the Pakistan Muslim
League-Nawaz (PML-N)-led Punjab government must strike a careful
balance between improving conditions and becoming associated
with a problem that is otherwise an albatross around the neck of
the Pakistan People's Party (PPP) federal government. Given its
constraints, Punjab's best option may be to focus on energy
efficiency instead of generation. End Summary.



- - -

LIGHTS OUT? LOCAL IMPACT OF A NATIONAL CRISIS

- - -




2. (SBU) Trade groups and sweltering citizens took to the
streets in Punjab province during the week of July 20 to protest
massive disruptions of electricity supplies. In the most
extreme incident, marchers in Jhang district burned four railway
cars (reftels). Internal federal Water and Power Development
Authority (WAPDA) estimates shown to Econoff July 28 put the
current supply demand gap in Punjab alone at 3,000 megawatts
(MW),and growing.



- - -

HAMZA SHARIF WORRIED ABOUT BLACKOUTS

- - -




3. (SBU) In a July 28 meeting with Acting Principal Officer, son

of the Chief Minister and Member of the Provincial Assembly
(MPA),Hamza Sharif, offered begrudging support for the central
government's plans to meet the energy crisis, which the Chief
Minister discussed with Prime Minister Gilani in a July 26
summit in Lahore. The PML-N has accepted the necessity of
rental power projects, which will start in December and last for
approximately three years. He acknowledged, however, that
rental power generation is an expensive and temporary fix. In
the medium-term, the federal government must take care of the
"circular debt" problem, Hamza stated. Finally, in the long
term, the province and federal government must work together to
identify viable power generation projects that could add to
capacity. "We need to move beyond Kalabagh and work together on
other sites" that could generate electricity, he underlined.
[Note: Kalabagh is a decades old proposal for a mega dam and
hydro-electric project on the upper Indus River. Punjab
supports the controversial project but the other provinces are
firmly opposed to it. End Note.] "India has added over 60 dams
on its side; we need to do the same," he added.



- - -

PROVINCIAL EFFORTS TO ADD SUPPLY

- - -



LAHORE 00000164 002 OF 003




4. (SBU) Punjab Secretary of Irrigation and Power Azam Khan told
Econoff July 28 that Chief Minister Shahbaz Sharif has expressed
concern about power outages since 2008, and had pressed for the
Irrigation and Power Department to invigorate the power sector.
In November 2008 the Chief Minister led a trade delegation to
China where he signed several Memoranda of Understanding on
economic cooperation, including one for work on hydroelectric
power projects in the province. Azam divulged that the province
would likely select a Chinese firm for the 120MW Taunsa Barrage
hydro-electric project now out to bid.




5. (U) The government of Punjab has initiated few power
projects, Azam admitted, and most of those under consideration
are still in the study or planning phases. New generation that
has reached the Request for Proposal (RFP) stage under
provincial efforts totals 470MW, but none of that power will
come on line soon. In addition to Taunsa Barrage, the province
has:

- Requested letters of interest for developing a 100MW
power station to be located in the Chakwal/Khushab coal area.
[Note: Post has conveyed a request for Trade and Development
Assistance funds for the province to conduct a coal survey in
the area. End Note.]

- Requested letters of interest for 50MW captive power
plants to serve each of four industrial estates in the province
for a total contribution of 200MW.

- Requested letters of interest for developing a 48MW solar
power plant in southern Punjab.

- Identified 317 potential hydro-electric sites on
existing Punjab canals and barrages that require feasibility
studies which could contribute an estimated 600MW.

- Identified 48 potential new micro hydro-electric sites
with a total of 350MW that still require feasibility studies.

- Hired consultants to study potential for wind power along
a 250 kilometer corridor from Kallar Kahaar to Mianwali.



[Note: The provincial government is allowed to lead the larger
Taunsa Barrage and Chakwal/Khushab Coal projects because they
are being developed as public private partnerships. End Note.]
Punjab's efforts may ease the electricity crisis in years ahead,
but Khan cautioned that the province lacks the funds for
feasibility studies and the expertise (and in some instances the
authority) to lead power development projects.



- - -

PUNJAB IRRIGATION AND POWER DEPARTMENT: POWER IN NAME ONLY

- - -




6. (SBU) Azam and a deputy, Muhammad Yaqoob, said that
historically, the power side of the Punjab Irrigation and Power
Department (PIPD) was "not active." Finance and personnel have
instead focused on the irrigation system, they recounted. In
spite of the Chief Minister's directive to target the power
sector, Azam acknowledged that PIPD faced two significant
hurdles to play a more effective role: 1) insufficient funds,
either locally generated or from the central government, and 2)
lack of talent to deliver the projects. The federal government
dominates the energy sector, he added. All private sector power
projects over 50MW are federal by definition, he explained, but
even smaller projects that could theoretically be handled at the
provincial level are effectively dependent on central government
money and expertise. Even hydro-electric projects placed in the
Punjab irrigation system were driven by the federal Water and
Power Development Authority (WAPDA). The province has little
technical talent on hand, Azam said, because the qualified labor

LAHORE 00000164 003 OF 003


available is drawn to the large programs and better compensation
of the central government or private consultancies, leaving PIPD
without the capacity to undertake power projects at the
provincial level. Mujtaba Piracha, Program Director of the
Punjab Resource Management Program (PRMP) and the leader of
capacity building efforts in the provincial government, offered
the same assessment to Econoff in an interview in June. He said
PRMP mirrors the PIPD approach and remains largely focused on
the richer talent pool dedicated to irrigation issues. Azam
added that PIPD "only wants to get into things which we know how
to handle." That actually excludes power opportunities
envisioned under the law as provincial topics, including captive
power and small biomass fueled cogeneration plants.



- - -

FEDERAL GOVERNMENT CONTROLS THE SWITCH, PLUGS INTO CORRUPTION

- - -




7. (SBU) The dominant role of the central government means that
potential power producers must at least coordinate with the
federal bureaucracy. Numerous sugar mill owners with an
interest in cane processing byproduct ("bagasse") fired
cogeneration power plants told an interagency delegation in May
2009 that they could not advance their projects at the
provincial level because the central government controlled the
pricing and concessions mill owners were seeking. Some
expressed reservations about the transparency of the federal
process, a concern raised by other post contacts as well.
Members of two prominent business families told Econoff that
they have slowed or stopped federal power projects in the past
because of the expectation of bribes. Both added that they
viewed the provincial government as "significantly less
corrupt."



- - -

COMMENT: PUNJAB SHOULD LOOK TO ENERGY EFFICIENCY TO AVOID A
MELTDOWN

- - -




8. (SBU) Comment: The provincial government has extremely
limited capacity to improve the power supply situation, but
faces the same popular backlash as the federal government. As
the central government follows through with the painful but
necessary commitment to set electricity tariffs at the actual
cost of service, provincial fears that public unrest will again
boil over if blackouts continue are quite real. Given
provincial constraints, Punjab's best option may be to focus on
the areas over which it can exert more influence: the demand
side of the equation. USAID and the Asian Development Bank have
argued that energy efficiency initiatives could quickly and
cheaply have a positive impact on Pakistan's power crisis, but
the province has not seriously explored a campaign to change
consumer behavior, nor support for efficiency programs at the
regional distribution companies. USAID is already working on a
model project with the Multan Electric Supply Company to manage
demand timing, improve efficiency, reduce theft, and boost
revenue. The project's impact could be enhanced by a
coordinated partnership with the Punjab government. A
provincial focus on energy usage leaves the federal government
solely responsible for addressing inadequate supplies. With
support from foreign assistance programs, Punjab could make a
meaningful contribution to solving the energy problem. End
Comment.
LOWE