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Govt aims to save $8bn in power plant conversion

The government plans to save $ 8.4 billion by converting 4,274 megawatts of furnace oil-based power plants to coal fueled ones, official sources revealed on Monday.

They said that this was decided in a meeting on energy chaired by the Prime Minister Mian Muhammad Nawaz Sharif.

The savings will be made by reducing the import of furnace oil, the sources said.Experts in the meeting apprised the premier of high cost of power generated from furnace oil.That’s the main reason of financial woes in the power sector, they told The News.

The experts said that besides incompetence, corruption and inability to collect bills were other major reasons.“The conversion will take about 18 to 20 months,” said a source. He said the ministry of water and power has all the details of the plants to be converted and the cost estimates.

He further said that saving of around Rs800 billion from the said conversion would not only address the issue of circular debt but would also spare resources for upgradation of the transmission and distribution systems in the power sector.

He said the steam based thermal plants are currently producing electricity at Rs15.5 per unit to Rs23 per unit against the average power tariff of Rs9 per unit.

In a pre-poll interview with The News senior PML-N leader Sartaj Aziz said that the total conversion cost from furnace oil to coal would be around two billion dollars.Now, the experts are mulling which power plant should be converted on priority.

Sources said that SABA power – an independent power producer — located in Sheikhupura could be picked for conversion to coal because the plant’s site had spare land available on one side where coal plant could be set up. The coal plant will take six months to become operational, they added.

The dilemma for the power managers of the country is that public sector power plants are plagued with incompetence and corruption.

The government does not want to hand over these units – after conversion to coal – to the previous management, the officials said. According to them, It desires that these plants would be run by private sector. In this regard, a transparent and fair mechanism is being devised so that the decisions are not challenged in court.

Power sector experts pointed out that even today at least 3,000 MW of thermal power generation capacity remains idle due to non availability of funds.

They said even then the system has the capacity to ensure stable supplies of 14,000 MW any time during the year. They said during summer months from mid June to September, the power generation could go up to 16,500 MW against the peak demand of 17,500 MW in peak summer.

They said that the government could give a go-ahead to the conversion of 2,000 MW of steam based thermal plants immediately and after their commissioning it could go for the conversion of the remaining capacity after 18 months.The experts also said that coal for these plants would have to be imported.

They said that the public sector plants and some IPPs are located 300-500 miles from sea and thus cost of coal transportation should also be considered.The prime minister also asked the private sector to set up at least 5,000 MW of coal power plants in the coastal areas of the country in order to save cost of coal transportation.

Electricity cost from these plants will be low and it can be transferred to other parts of the country through national grid.

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