Effects of load shedding in pakistan

2010 Effects of Load Shedding on Industries 11/5/2010

PREFACE This report “Effect on Load shedding on industries” is about the impact of load shedding on industries. Our main aim in this report is to identify the strengths, weaknesses, threats and opportunities, to study the environment, drawbacks, reasons, and solution for load shedding.

LETTER OF TRANSMITTAL Mr. Sallahuddin, Course Instructor of Business Law, BIZTEK Karachi Nov 5, 2010 Respected sir, We here by represent our final report concerning the effects on load shedding on industries as assign by you as a mandatory part of course. Hopefully, our report will fulfill its purpose and prove to be beneficial for the students of business law. We also hope that the report will be up to your expectations. Any information or queries regarding this report will be highly appreciated by our team members. Sincerely, Raheel Razzak Sami-ur-Rehman Abdul Qadeer Atif Ahmed Sheikh Abid Ali

GROUP PROFILE We, the group members of the report on “Effects Of Load Shedding on Industries” are currently doing Masters in Business Administration (MBA) from BIZTEK. Raheel Razzak (BME/1173) Abdul Qadeer (BME/1168) Sami-ur-Rehman (BME/1172) Atif Ahmed Sheikh (BME/1167) Abid Ali (BME/1110)

EXECUTIVE SUMMARY Electricity is in short supply in Pakistan, and as a result electric load shedding, break downs, power outages, fluctuations, blackouts etc are a common feature in the country. Whether it is summer or winter, load shedding is there. Some times it is scheduled, while or other occasions it is totally unscheduled. The letter is the worst because it causes untold problems and hardships to the electricity dependent community. It can be confidently said that the electric supply has never been reliable at any time in Pakistan. There are many factors behind electric load shedding in Pakistan. These factors include shortage in river waters, over population, new connections, electric supply to villages, low generation of electricity, fewer dams, power theft, line losses etc. Then load shedding is the result of corruption, inefficiency, mismanagement and defective planning in WAPDA besides incomplete projects like Kala Bagh Dam, misuse of available resources, no generation from atomic and solar energy, lack of consensus and the apathy of the government contribute to load shedding. Load shedding is a great curse. It brings untold misery to people belonging to all walks of life weather they are students, patients, businessman, industrialists, farmers, laborers, mechanics, house wives etc. It brings all economic, Agricultural and industrial progress to a standstill. The fluctuation plays havoc with the electric equipments like refrigerators, VCRs, Televisions, and Computers etc. The foreign investors shun investing money in different fields due to load shedding starts a long episode of helplessness and frustration. Pakistan can not make progress in any field in the presence of load shedding. Therefore government should take all possible measures to end load shedding from the country. First of all it should remove corruption, inefficiency and mismanagement from WAPDA. New mega dams should be constructed with out further delay. The present available resources should be developed immediately. Power should be generated from solar and nuclear energy. Power theft should be should be stopped forthwith. On the other hand people should make wise and proper use of electricity.

They should turn to using energy saving device. No doubt such steps can help a great deal in ending load shedding from the country.

INTRODUCTION Electricity load shedding in Pakistan has increased manifold. Minister of water and power Raja Pervaiz Ashraf assured that electricity load shedding would be done according to time schedule. He assured that electricity load shedding will finish by the end of the year 2009 but instead it is doubled what it was in the past year 2009. It is big failure of the government of Pakistan. No country can make progress without electricity. Recent government measures of holiday on Saturday and other saving methods have reduced load shedding but not significantly. Here I want to reveal one big waste of electricity by WAPDA, LESCO and other cities electricity board employees. One low grade LESCO employee told me that he is getting 2,100 units free electricity per month. He told that senior officers are getting 7,000 units and more free electricity per month. So, these employees are getting free electricity equal to their salaries. All this free electricity is being wasted on numerous air conditioners or selling to other rich people. Holiday on Saturday is loss for backward Pakistani nation since already government office procedures are dead slow. Protests are taking place around the country. People of advanced countries cannot imagine to live in such circumstances for a single day. I have never seen such a intense electricity load-shedding during my whole life. Minister of water and power Raja Pervaiz Ashraf failed to fulfill his promises. Electricity load-shedding is one of the biggest issues in Pakistan including poverty and unemployment. Government should take drastic measure to finish this electricity load-shedding. Pakistani nation is unhappy that government and opposition is busy in other legislative issues instead of resolving these primary issues. I challenge that I can resolve electricity load- shedding issue in one year if I become minister or high official of ministry of power. On February 06, 2010 there was eight hours of continuous load shedding. Such shutdown takes place one day every week on the pretext of maintenance. Local LESCO employees told that this shut down takes place from local Grid station. SDO and XEN never attend their mobiles. There numbers are provided on electricity bills

as a joke. Similarly other responsible authorities concerned with load-shedding are not attending their phones. I talked to PS of LESCO chief executive and suggested him to suspend such staff who are not fulfilling their duties. There is another very unjust aspect of electricity load shedding. There is no or less electricity load shedding in officer’s colonies or in rich posh areas. Always equal treatment is suggested by all national and international organizations. There must be equal time of electricity load shedding for every part of Lahore. Further electricity load shedding is being used as a weapon in order to obstruct people from work. This type of electricity load shedding happens any time without any time table. Political parties have joined hand for forming coalition government but people are facing inexpressible difficulties. Now political parties should work together for the resolution of important issues like electricity load-shedding and people’s poverty.

WHAT IS LOAD SHEDDING Load shedding is what electric utilities do when there is a huge demand for electricity that exceeds the generation available. The alternative is to have a brown-out where the voltage is reduced. FACTORS OF LOADSHEDDING There are many factors behind electric load shedding in Pakistan. • These factors include shortage in river waters, • over population, new connections, electric supply to villages, low generation of electricity, fewer dams, power theft, line losses etc. • The load shedding is the result of corruption, inefficiency, mismanagement and defective planning in WAPDA besides incomplete projects like Kala Bagh Dam, misuse of available resources, no generation from atomic and solar energy, lack of consensus and the apathy of the government contribute to load shedding. • KESC deliberately switches off power units to conserve fuel • Valuable power-generation equipment is protected from being damaged by excess power demand or "distribution network overload" conditions. • One most important factor of load shedding is circular debt. The reality of circular debt is KESC didn’t make payment to WAPDA, and WAPDA didn’t make payment further……..

EFFECTED GROUPS • social-priority customers - such as hospitals, defence, police, national communications services and vital manufacturing plants - can continue to be supplied with power even though non-priority customers - such as normal domestic homes, offices and shops - may have to be subjected to power outages during a period of load-shedding That factory has losses from shutting down its equipment and idling its workers. • According to an estimate, there are 10,000 factories in Lahore, among which approximately 30-40 percent factories have been closed because of load shedding. These factories were utilizing electricity and Sui gas in a huge amount. In these factories, plastic molding, rubber articles, leather garments, cotton, iron-made goods, and many other things were being produced • According to the labor department sources, approximately 800,000 laborers have been dispelled from their jobs. While, 400,000 to 800,000 laborers were receiving less wage. “The owners have finished the overtime facility because of loadshedding and this was increasing our hardships • Marriage halls will no longer be able to host all-night wedding parties • Neon signs and brightly-lit billboards are to be banned • The prolong load shedding in all four districts of Faisalabad has not only disturbed the public life but also left drastic impact on industries and commercial activities. According to details, the load-shedding hour has reached from 18 to 20 and 20 to 22 in all four districts of Faisalabad division including Toba Tek Singh, Chiniot, Jhang and Faisalabad. The power looms factories have closed owing to unscheduled and prolonged load shedding while hundreds of industries are also going to be closed while, thousands of labourers have become jobless. Un-scheduled load shedding has left ruinous impact on Textile and Hosiery industry. The national exchequer has to bear loss of million dollars when Textile and hosiery industry of Faisalabad cancelled foreign orders owing to prolong load shedding

SUGUESTIONS AND SOLUTIONS • First of all Government should remove corruption, inefficiency and mismanagement from WAPDA. • New mega dams should be constructed with out further delay. The present available resources should be developed immediately. • Power should be generated from solar, nuclear energy, wind turbine and water turbines. Power theft should be should be stopped forthwith. On the other hand people should make wise and proper use of electricity. They should turn to using energy saving device. No doubt such steps can help a great deal in ending load shedding from the country. • There are many other cases where lots of smaller consumers agree to reduce demand on hot summer days, such as by reducing air conditioning or lighting. • In most of the companies and offices, the electricity is consuming highly, as interior designing in the offices ACs are used instead of general fans and the fancy lights also used as the interior designing is.

ELECTRICITY LOAD SHEDDING IN PAKISTAN ONLY DUE TO DEFECTIVE POLICIES The electricity load shedding in Pakistan would have not been a big problem to cope with but its made much bigger by adopting the defective policies. One of the causes of load shedding is called the circular debt, which means the private electricity generation companies keep generating the power but they do not get the money for the electricity they have provided, in that case they can generate the electricity for limited period and after that when the outstanding amount to be paid by government to these companies cross a limit, by being not able to fuel costs these companies stop the production till they have get paid back by government. This have been happening very much lately, current approach from government is they let the circular dept build up and while companies stop production they are paid back after many months and mean while that halt brings in more shortage and more electricity load shedding subsequently. Now this is the place where the issue of rental power plants comes in. The question is, when you are not able to finance the current infrastructure and when you are not fully utilizing the current generation capacity, why on earth you need the rental power plants? – It would have made some sense if the rental power plants would have have come with low cost electricity but unfortunately other than thinking of paying back the circular dept and taking all the current resources in action our government have chosen to bring in the rental power plants. The plants which does not still started generating the power but we already started paying the rent money. After carefully reading what’s written above one can decide that the rental power plants stunt was really not required at the moment. Moreover when you live in country which is blessed with so much of natural resources why on earth you have to go for rental power plants. Wind forms and solar energy power plants have got huge potential in this country which can bring in lots of low cast energy, also if more dams are planned, we can get much more hydro power.

After that come in the coal reserves which is blessing for this nation, we have got the coal reserves which are in few biggest coal reserves of the world. Research shows that if we use just 2% of these reserves for power generation we will be able to keep on generating the extra 25000 Mega Watts of power for next 40 years just from coal and we just have overall electricity consumption of 16000 Mega Watts country wide today. 12000 Mega Watts of power out of our 16000 mega watts is already being generated. The above facts clearly show that if the right policies are adopted we can not only generate enough power to meet our energy requirements but also generate power to sell out. The problems of our country have never been the resources but only and only the sincere leadership which really cares for the country and all the souls living in it. For the moment we can just pray to Allah for blessing Pakistan with the leadership which is sincere and capable of making things happen. Next time when you vote in elections just think for your country and nothing else, keep the previous experiences in mind, they will help you much. CURRENT ISSUES LAHORE, April 15, 2010 (Frontier Star): Chambers of Commerce & Industry in Punjab and Trade, Industrial Associations of Lahore have warned that they would be forced to handover the keys of their premises if the electricity and gas load shedding are not immediately stopped. Entrepreneurs from all major industrial sectors and representatives of all major markets of the city at a meeting held at Lahore Chamber of Commerce and Industry resolved that the selective load shedding Punjab would no more be tolerated. The meeting was attended by Presidents of Sargodha, Sialkot and Gujranwala Chambers of Commerce and Industry, former President Sheikhupura Chamber of Commerce Manzoor Malik, the representatives All Pakistan Textile Mills Association, Lahore Township Industrial Association, Ferozepur Road Industrial Association, Pharmaceutical Association, Steel Furnace Owners, Steel Melters Association, representatives of auto vendors,

plastic manufacturers, packaging industries, and all major Lahore Markets. Attributing the unprecedented power outages the result of incompetence the meeting asked for removal of all the PEPCO and LESCO officials responsible for the electricity crisis. The meeting also questioned the wisdom of the government in granting nine extensions to the MD Sui Northern Pipeline Company and demanded his immediate removal. They were unanimous that the gas supplies during the tenure of the present MD SNGPL have been erratic and inconsistent. President Lahore chamber of Commerce and industry Zafar Iqbal Chaudhry demanded that PEPCO and LESCO should be privatized immediately. And the new boards should be constituted in consultation with the private sector so that they could take decision in collaboration with real stakeholders. He said the government should announce immediate construction of Kala Bagh Dam and assured that the entire amount needed for its construction would be provided by the people of Pakistan. He said that consensus on this issue should be obtained from all federating units on the same manner as done in case of NFC and 18th amendment. After passing these resolutions the participants of the meeting staged a protest march towards Governor House. They were carrying banners inscribed with slogans against LESCO and PEPCO authorities. Hundreds of entrepreneurs were joined by over thousand workers of the industries and shops that chanted slogans against PEPCO, SNGPL and LESCO. The participants also demanded of the government to expedite work on Neelum-Jhelum, Basha Diamir projects for the sake of our future generations. They said that they were unable to understand that why the government was not taking any initiative to put in place alternate electricity generation projects despite availability of huge coal reserves, vast tracts of Windy areas and abundant solar energy.

LOADSHEDDING IN PAKISTAN GIVES BIRTH TO NEW COTTAGE INDUSTRY LAHORE: The unending load shedding was giving rise to a new form of cottage industry which was producing scores of goods to counter the power outages. Load shedding, though, has adversely affected the big industries, yet it helped small industry to grow Small manufacturers, who were actually exploiting load shedding, are getting handsome amount by making emergency lights, candles, generators, UPS and many others. The ignored and even dying business of artificial power sources got strength in the current “era of darkness.” This load shedding crisis started for a long time ago, this gave birth to the electrical equipments price-hike. Since that period, the price has not come down and the manufacturers earning abnormal profits for energy articles. An industry has come into being which was creating jobs (sort of cottage industry) and has expanded to many homes from workshop or factory and manual labor has been benefited. According to an estimate, there are 10,000 factories in Lahore, among which approximately 30-40 percent factories have been closed because of load shedding. These factories were utilizing electricity and Sui gas in a huge amount. In these factories, plastic molding, rubber articles, leather garments, cotton, iron-made goods, and many other things were being produced. According to the labor department sources, approximately 800,000 laborers have been dispelled from their jobs. While, 400,000 to 800,000 laborers were receiving less wage. “The owners have finished the overtime facility because of loadshedding and this was increasing our hardships,” said Mubarak, a worker at Band Road. However, on the other hand, many producers are making Ultra Power Supply (UPS) of 500-1000w and selling them on various prices ranging from Rs 6,000-12,000. They claimed that at least two tube lights, two fans, one computer and one TV could be run, but the price, they are charging, did not include the cost of battery of 48A or more, which was available in the market at Rs 2,400 to Rs 4,500. Moreover, the

battery age was approximately one-year and if the battery spoiled, the consumers have to bear more charges for its repairing or replacing. Rashid, a generator dealer said that 2007 has recorded an increase in the prices of ordinary generator by Rs 2,000 to Rs 5,000 depending on different brands, sizes and quality. Usually, the China made generators were being used more, as compared to other imported ones, whose rates were very high. Saleem, a generator dealer, told The Post that the market was stocked with various varieties of generators in accordance with their power capacity, some were operated on diesel, and petrol and some on gas. It is pertinent to mention here that replica articles have also captured the markets due to its low price, although there was a serious concern about their quality. Most of the shopkeepers were selling artificial light gadgets because, they said, the common people forced them to bring these goods to the markets. But the risk of these commodities, being a substandard quality, pose a grave risk that it might be exploded. In summer season, coolers and fans demand would also rise, especially in schools, colleges, homes, offices etc. and in case of continuity of loadshedding, the demand of artificial energy resources would likely to rise. IMPACT ON ECONOMY • Load shedding can affect the country's economy. It has an over all effect on people's life. It slows down the industrialization. It affects commercial operations as most of the operations are in the evening hour’s effects the student's studies also. • Shortage of furnace oil and oil prices is continuously increasing. Due to continue use of furnace oil in self generation of electricity. (generators)

• Load shedding is resorted mainly because of the demand supply gap during peak hours. the situation can be managed to an extent by the co operation of the consumers to flatten the load curve. The consumption which can be shifted from the peak hours to other time slots can ease the situation. And causing increase in inflation because price is also increasing of good or commodity per unit 30% to 60% SUPPLY & DEMAND OF ELECTRICITY IN PAKISTAN Supply and Demand of Electricity in Pakistan Supply and Demand Position: 2008-2020 (MW) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Existing Generation 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 15,903 Proposal / Committed 530 4,235 7,226 10,115 10,556 13,307 13,520 14,607 16,134 18,448 18,448 18,448 18,448 Generation Total Existing/Committed 16,484 20,138 23,129 26,018 26,459 29,210 29,423 30,510 32,037 34,351 34,351 34,351 34,351 Generation Expected Available 13,146 16,110 18,503 20,814 21,167 23,368 23,538 24,408 25,630 27,481 27,481 27,481 27,481 Generation Demand (Summer 16,484 17,868 19,352 20,874 22,460 24,126 25,919 28,029 30,223 35,504 34,918 37,907 41,132 Peak) Surplus/Deficit -10,42 -13,65 -3,338 -1,758 -849 -60 -1,293 -758 -2,381 -3,621 -4,593 -8,023 -7,437 Generation 6 1

Effects of load shedding in pakistan

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