Pakistan: Laraib first private sector hydropower plant

Pakistan’s first private sector hydropower plant has commenced operations. This project has been established by Hub Power Company (Hubco) that also enjoys the distinction of being country’s first independent power plant (IPP).

According to an announcement 84MW hydropower project of Laraib Energy has successfully commenced commercial operations on 23rd March. Laraib, a fully owned subsidiary of Hubco has constructed this project on Jhelum River in Azad Jammu and Kashmir (AJ&K).

The project will contribute 540 GWh of green energy annually to the National Grid under a 25 year Power Purchase Agreement (PPA) with National Transmission and Dispatch Company (NTDC).

The Project is located on Jhelum River 7.5 km downstream of the 1,000 MW Mangla Dam, a major multi-purpose water storage project commissioned in 1967. The Project does not involve the construction of a dam or reservoir nor will it affect the existing water management regimes. It will withdraw water released from the existing Mangla Dam and return that water to the main stem of the Jhelum River through a 6.5 km long tailrace constructed in a sub-channel of the River Jhelum. 

Speaking on the occasion CEO of Hubco,  Zafar Iqbal Sobani said, “This project will provide cheaper electricity and energy security to the country. Other benefits of the run-of-the river NBE HPP include replacement of some 135,000 tons of oil import valued in excess of US$100 million per annum and reduction in carbon emissions”.

The project was scheduled to be completed in 42 months, but was completed 2 months ahead of the schedule, comparing three similar low-head hydropower projects on the Ohio River, USA totaling 191MW started a year before NBE but still have a year to begin commercial operations.

Hubco has thanked the successive Governments of Pakistan as well as the Government of Azad Jammu and Kashmir, the Private Power and Infrastructure Board, WAPDA as well as NTDC, for their support and lending massive experience in hydropower.

Hubco also acknowledged the important part played by the AJ&K Private Power Cell of the AJ&K Hydroelectric Board in the project’s long development journey.

The Asian Development Bank and other lending banks, multilaterals IDB, IFC and Proparco France and two domestic commercial banks National Bank of Pakistan and Habib Bank for playing  a pro-active and constructive role in structuring the project and financing of the project, thus making this pioneering project becoming a reality.

Hike in gas tariff must be resisted

Till recently it was said that the performance of gas distribution companies was far better than electricity distribution companies but now it seems gas companies are also suffering from the same contentious problems.

Instead of overcoming the inefficiencies, mismanagement and blatant violation of good governance, gas companies are persistently asking Ogra for tariff hikes. This trend has to be discouraged because it is the responsibility of the management of Sui twins to meet the benchmark fixed by the regulator, rather than asking to condone the inefficiencies.

To begin with, the policy of guaranteeing a fixed return on net operating assets as high as 17.5 per cent is not justified. This may have been need of the time when these utilities were busy in undertaking expansion of transmission and distribution networks but now it can't be termed a prudent approach.

Since the Government of Pakistan (GoP) holds majority shares in gas distribution companies demanding a fixed return on net operating assets is nothing but fleecing consumers.

In fact the GoP gets double advantage with each hike in tariff: 1) increase in income of gas distribution companies yields additional corporate tax collection for the government and 2) additional dividend income.

The demand for hike in tariff may have some justification had the Sui twins not carrying huge load of receivables and suffering from out of proportion UFG.

In fact sector experts say that the much talked about hike in UFG is nothing but blatant theft of gas being going on with the connivance of staff of gas distribution companies.

This point gets credence because of the recent hike in UFG, mainly due to pilferage of gas by CNG stations and industrial units owned by the politicians and those having access to power corridors.

Having said that it is necessary to point out that power generation companies owe billion of rupees to Sui Twins. According to the sector experts the total receivables of gas companies from public and private sector power generation companies now hover around Rs100 billion.

To meet the cash requirement gas companies borrow from commercial banks on which huge financial cost is paid that is ultimately recovered from the consumers. Therefore, it may be right to say that Ogra should not allow increase in tariff unless gas distribution companies recover outstanding amounts and bring down the UFG level to the benchmark fixed by the regulator.

In case Ogra increase tariff it not only fails in discharging its statutory duty but also becomes a partner in ripping off consumers. One may ask that what the way should be out in case the first two options could not be exercised?

To start with the GoP can make deductions at source and pay off the liabilities. In case this may not work out than salary of senior executives and staff should be slashed, as they fail to discharge the duty for which they were hired.

 Even a cursory look at profit and loss statement of gas and electricity distribution companies show that they not only these entities suffer from top heavy management but executives are paid exorbitant salaries and perks.

As a rule remuneration is linked with the performance and the only criterion in case of a public limited company is earning per share without any guarantees.

It is necessary to highlight that the Board members and top executives of gas distribution companies are now openly challenging the authority of regulators by refusing to comply with the rules and decisions.

In such a case it becomes all the more necessary for Orga to establish its writ.

It also becomes obligatory on the judiciary to avoid accepting such cases for hearing and passing on stay orders because the cardinal principal is 'violator has to pay the penalty'. In this case the crime is out of proportion increase in UFG, which is pilferage.

A thief, when he rips off the entire nation must be given exemplary punishment, be it a consumer or an employee of the company!

Iran Pakistan gas pipeline: Another point of view

I am pleased to place this article published in eurasiareview http://www.eurasiareview.com. Its title is Iran Viewpoint: Washington Angry over Tehran-Islamabad Gas Pipeline Agreement. It has been originally printed in Iran Review, a Tehran-based site that claims to be independent, non-governmental and non-partisan and representing scientific and professional approaches towards Iran’s political, economic, social, religious, and cultural affairs, its foreign policy, and regional and international issues within the framework of analysis and articles.

The final phase of the Iran – Pakistan gas pipeline project, which is to be built on the Pakistani soil, was launched in a ceremony attended by Iran’s President Mahmoud Ahmadinejad and his Pakistani counterpart, Asif Ali Zardari, on Monday, March 11, 2013. The first section of the pipeline, which runs over 900 kilometers from Iran’s Assaluyeh region to the city of Iranshahr in Sistan and Baluchestan Province had been inaugurated about one and a half years ago. Construction of the second section of the pipeline with the total length of 120 km, which runs from the southeastern Iranian city of Iranshahr to Pakistani border, started last year. The last tranche of the pipeline on the Pakistani soil is expected to be finished in the next two years.

This project is of high significance to both countries. Construction of a pipeline for the export of Iran’s natural gas to its eastern neighbor is of special importance to Islamabad because Pakistan is facing serious energy crunch. The problem was even worse during this winter when some Pakistani cities experienced power cuts which at times lasted up to 18-20 hours a day. In addition, many Pakistani plants, especially those related to the country’s textile industry, had to shut down their operations as a result of sever energy shortage. When looked at from this viewpoint, it is clear that the gas pipeline from Iran will be able to guarantee long-term and secure energy flow to Pakistan.

On the other hand, in view of special conditions of Iran and the sanctions which have been imposed against the Islamic Republic during the last year, the country has been facing difficulties for selling its energy resources. As a result, this pipeline will help Tehran to go around sanctions and will be of serious help to Iran under the existing economic conditions.

In addition to long-term economic benefits which Iran is bent on achieving through presence in global energy markets, the pipeline is of high importance to Iran from a political viewpoint as well. The West, especially the United States, has been putting pressure on many countries to dissuade them from concluding oil and gas contracts with Iran. They had also put tremendous pressures on the governments of India and Pakistan to make them abandon the energy deal with Iran.

It was due to the high importance of the project that Iran was even ready to give concessions to Pakistan to go on with the construction of the gas pipeline. As a result, the Islamic Republic accepted to grant 500 million US dollars as credit in loan to Islamabad to be spent on the construction of pipeline by Pakistan. Before that, the two countries had differences over this issue, which were resolved through the final agreement.

Due to the above facts, the pipeline project can get the two neighboring countries engaged in a very important project which will not only serve the interests of both countries, but will also have an obviously positive impact on bilateral relations between Tehran and Islamabad.

Despite all the above facts, the pipeline had been originally designated as the “Peace Pipeline” because it was supposed to be built through cooperation among Iran, Pakistan and India. However, despite extensive plans and a whole decade of negotiations, the project was finally aborted. So, why the project is currently being implemented in the absence of India?

In reality, India initially agreed to the project, but it finally abandoned it for two major reasons. The first reason was that the Indian officials did not want the pipeline to cross through Pakistan soil. The Indian officials were concerned that in case of possible future tension in relations between Islamabad and New Delhi, Pakistan may use the pipeline as a means of putting pressure on India by cutting off the gas flow.

Therefore, India proposed that the pipeline should be built under the sea. Indian officials noted that the pipeline may run on the ground up to the Iranian border with Pakistan in Gwadar region of Iran’s Chabahar city. Thenceforth, the pipeline was supposed to go under the sea and continue toward the Indian city of Mumbai. Implementing the project in that way would have been both too costly, and needed cutting-edge technology which was not available even to India and could be only provided by a few European countries and the United States.

The second reason which dissuaded India from taking part in the project was that New Delhi would have to pay a transit fee of about 350 million dollars per year to Pakistan for the transit of gas while India was by no means willing to boost the economic strength of its rival neighbor. Therefore, India was very hesitant about taking part in the project due to the aforesaid reasons.

Of course, the United States’ opposition and Washington’s pressure on New Delhi to abandon the project also influenced India’s decision. Although this does not mean that India’s decision has been totally influenced by the US pressure, in reality, the contract signed between the United States and India according to which Washington is supposed to build 13 nuclear power plants for India had greatly increased India’s doubt about being part of the Peace Pipeline project.

The Indian officials reached the conclusion – on the basis of a loss and benefit estimate – to give priority to their national interests and go on with the agreement they had already signed with the United States at the cost of withdrawing from the Peace Pipeline project. This, however, does not mean that the issue of the Peace Pipeline has been forgotten for good and ever in India. The Indians look at it as an open case which may be followed up in the future in order to forge a deal with Iran over its natural gas resources. At any rate, it should not be forgotten that as a result of very rapid economic development in India, the country’s demand for energy is very high and that demand is sure to skyrocket in the future.

Therefore, I believe that the Indians will first take that concession from the United States and then they will enter into a deal with Iran on the basis of their national interests. In doing so, they will conclude the pipeline contract with Iran in order to extend the Iran – Pakistan pipeline up to India and take advantage of Iran’s natural gas resources.

Of high importance in this regard is the close rivalry between India and China. It is noteworthy that China has made hefty investment in Gwadar region. Therefore, in case of a good opportunity and if a suitable price is offered for gas and the project’s cost seems feasible, China might be willing for the pipeline to further travel to Tibet by crossing Karakoram Mountains.

This will be a problem for India in the long run as its rival will be able to take advantage of the pipeline. This is especially true as China’s need to energy continues to soar in coming years. Therefore, India is sure to strike a deal with Iran in the long run over the latter country’s gas resources. In the short term, however, India will stay away from the project as long as the United States has not built the aforesaid nuclear power plants for India.

US can’t afford to antagonize Pakistan

Over the years Pakistan has been fighting proxy US war in Afghanistan, not because of any love for Afghans or even to please the super power. It has been dragged into it and one could sum up the negotiations in before US assault on Afghanistan in one sentence ‘either you are with us or with our enemies’. At that time Pakistan had no option but to bow down as India was ready to join the US crusade. By that time Pakistan was also facing enduring economic sanctions for undertaking ‘nuclear test in 1998 and the probability was that refusal to join the war may also lead to air strikes on Pakistan’s sensitive installations.

On this Monday, Iranian Presidents Mahmoud Ahmadinejad and Pakistani President Asif Ali Zardari jointly inaugurated the work on the of 780-km Pakistani segment of Iran-Pakistan gas pipeline in the Iranian port city of Chahbahar. The point to be noted is that in this city India is constructing a sea port which is also being linked with Central Asia via Afghanistan on which the United States has never raised any objection. In fact it may be said that India is doing this under the instructions of United States which wants an alternative route, other than through Pakistan.

As I have said earlier United States is once again following .carrot and stock policy’. Victoria Nuland of the US State Department on one hand warns Islamabad that its cooperation with Tehran falls under the Iran Sanctions Act, which means that Pakistan may face a ban on its transactions through American banks and that U.S. military and other aid to Pakistan may be curtailed. She also plays the mantra that the US administration is willing to offer other alternatives, but little has been done to date.

Pakistan is rightly demanding its treatment at par with India, if it has to quite Iran-Pakistan gas pipeline, this could be done on only one condition supply of nuclear technology for civilian use. The US has offered this to India in exchange for deserting the gas pipeline project.

This morning I got another inspiration after reading an article in eurasiareview quoting Russian analyst Maxim Minayev of the Civic Society Development Foundation on the matter. He said “I don’t think that Washington will cut its military aid to Islamabad as long as the Afghan campaign continues. The aid is meant to strengthen Pakistan’s defense capacity, particularly against radical Islamist groups. Speaking about Pakistani-US relations, one should bear in mind the potential of those who oversee them in the White House, namely US Secretary of State John Kerry and Vice President Joseph Biden. I think that such players will manage to create additional opportunities for the White House in terms of minimizing the impact of the Pakistani-Iranian pipeline project”.

In his view impositions of sanctions may have the opposite effect. If Washington curtails political and military cooperation with Islamabad, the latter will move to expand ties with China. That’s not what the White House wants. There will be a general elections in Pakistan in May with the ruling Pakistan People’s Party facing a tough challenge from the Muslim League-Nawaz led by ex-Prime Minister Nawaz Sharif. Both the parties are campaigning on the promises to ease the country’s energy crisis that has reduced its GDP growth rate to around 2.5%. Therefore, any party that wins majority or form coalition government, its first priority will be to resolve looming energy crisis.

In fact President Asif Ali Zardari has won hearts of Pakistanis once again by transferring control of Gwadar port to China and commencing work on Iran-Pakistan gas pipeline. Any effort by the United States to create hurdle in smooth working of these two projects could raise two popular demands: 1) Pakistan should immediately pull itself out of US proxy war and 2) stopping movement of Nato supplies through Pakistan with immediate effect. I hope the US government just can’t afford either one.

I also tend to agree with Russian Orientalist Sergei Druzhilovsky. He believes that the project will go ahead, no matter who wins the election. All the more so that Iran has already built its 900-km segment of the pipeline and hopes to extend it into India. For Pakistan, gas transit means handsome profits. The latter circumstance must have outweighed the alternatives proposed by Saudi Arabia and the United States. Last May, Pakistani Foreign Minister Hina Rabbani Khar made clear Islamabad would not yield to pressure over the pipeline.

Pakistan needs gas to keep its thermal power plants running and industries operating at optimum capacity utilization. Last but not the least Pakistan has a right to demand that the United States should first impose economic sanctions on India for buying oil from Iran, constructing Chahbahar seaport and rail and road network in Iran.

 Iran-Pakistan gas pipeline ground breaking today

Arrangements have been made for the ceremony that would mark the start of work on Pakistani portion of Iranian-Pakistani gas pipeline. This is over 780 kilometer long and ran into snags due to pressure from the United States and difficulties in mobilizing funds. This portion of pipeline is estimated to cost US$1.5 billion and Iran has promised to provide one-third or US$500 million. The portion of pipeline on the Iranian side has almost been completed.

Pakistani leadership is showing determination and made it clear that it would complete the venture. The country seems to be enjoying support from China and Russia on this issue as since last two years Pak-Russia relations have entered in new phase and China is Pakistan’s old dearest friend. Lately, President Zardari has said Pakistan is a sovereign country and has the right to pursue projects in national interest and does not intend to offend anyone.

Iranian President Mahmoud Ahmadinejad and Pakistani President Asif Ali Zardari will jointly inaugurate the pipeline construction work. The ceremony will be held in the Iranian coastal city of Chabahar. Both the presidents will also sign an accord for 400,000 barrel per day capacity oil refinery to be established at Gwadar. Some of heads of states and other dignitaries also expected to attend the ceremony.

Foreign Ministry spokesman Moazzam Ahmad Khan has said,"We are not in a fix, we are very clear about it that the pipeline is in our national interest being an energy deficient country," Khan said, while hoping that the US would show "more understanding" on Pakistan's decision to go ahead with the pipeline. "Yes, we know about their concerns but hope our friends, including the US, will understand our economic compulsions," said Khan.

Brushing aside concerns and pressures of the United States, the spokesman said the whole world should realize that the project was being commissioned purely to meet economic needs of the country and was being executed by two sovereign states.

“The government is initialing this important project in view of the energy requirements. The project will bring economic prosperity, provide better opportunities to the people and help defeat militancy,” he said.