ABSTRACT

This report focuses on the problems faced by WAPDA

in its daily operations. It provides some suggestions
to the contemporary issue and problems by WAPDA

Presented By:
Abdullah Ismail Khan 12-Arid-1395
Rahat Mukhtar 12-Arid-1459
Rashid Sohail 12-Arid-1463

Presented To:
Water and Power Development Dr. Hafiz Muhammad Ishaq
Authority (WAPDA)

SUBMISSION DATE:
MAY 24TH ,2016
Contents
Introduction: ............................................................................................................................................... 2
History: ........................................................................................................................................................ 2
Vision statement: ..................................................................................................................................... 3
Mission statement: .................................................................................................................................. 3
Problems in WAPDA:................................................................................................................................. 3
Problems with policies and vision & mission statements of WAPDA: ............................................... 3
Problems and controversies on large purchases: ................................................................................. 4
WAPDA'S cost of power: ....................................................................................................................... 4
High debt burden: ................................................................................................................................... 4
Lack of updated technology: .................................................................................................................. 5
Weak supply chain:................................................................................................................................. 5
Distribution Problems: ........................................................................................................................... 6
Management Issues:................................................................................................................................ 6
Theft problems: ....................................................................................................................................... 6
Extra Privileges for employees: ............................................................................................................. 7
Power Crisis: ........................................................................................................................................... 7
Leadership Problems: ............................................................................................................................. 8
Other Problems: ...................................................................................................................................... 8
Other Suggestions: ...................................................................................................................................... 8
Bulk power sale to KESC: ...................................................................................................................... 9
Bulk power purchase from PAEC:........................................................................................................ 9
WAPDA receivables from the provinces: ........................................................................................... 10
Fuel oil purchase arrangements: ......................................................................................................... 10
Private production and distribution of electricity: ............................................................................ 10

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Introduction:
Pakistan Water and Power Development Authority (WAPDA) was established through an Act of
Parliament in 1958. It is an autonomous and statutory body under the administrative control of
the Federal Government. The Authority consists of a Chairman and three Members (Water,
Power and Finance). WAPDA was unbundled in the year 2007 whereby the functions of its
Power wing were redefined as Hydel Power Generation and Operation & Maintenance (O&M)
of power houses. Following unbundling of its power wing, WAPDA’s mandate is now
development of water and hydropower resources in an efficient manner.

In order to meet the requirements of the country in both water and hydropower sectors with an
ultimate object to put Pakistan on the track of development, WAPDA has planned to construct
five multi-dimensional water storage dams during the next 3-12 years. The building of these
dams will not only help address acute water challenge but also produce cheap and clean
hydroelectricity.

These projects will not only be beneficial at the national level but will also be instrumental for
development of remote and less developed regions of the country where they are located. In line
with its mandate, WAPDA is working hard to harness water and hydropower resources in the
country. The idea is to generate affordable, clean electricity, which will provide relief to the
consumers by bringing down the power tariff. The building of water storages will meet the water
requirements besides playing their role for mitigation of flood hazards.

History:

WAPDA was established in February 1959 to unify the maintenance of infrastructure previously
overseen by provincial agencies. Its Chairmen included outstanding civil servants like Ghulam
Ishaq Khan, Ghulam Faruque Khan and Aftab Ghulam Nabi Kazi who were
subsequently President of Pakistan, Minister for Commerce and Economic Adviser, respectively.
In October 2007, thermal power management was split into the newly formed Pakistan Electric
Power Company (PEPCO).

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Vision statement:

To provide state of the art learning environment for nation building activities with organizational
success through enhanced performance skill

Mission statement:

To intensify the leadership quality of both “individual” and “client” organizations through
interactive learning models that immerse managers into a transformational experience which
fosters professional, intellectual and personal development. This is achieved through presenting
programs that challenge executives to grow as leaders, to shape powerful ideas into decisive
action plans and to think and behave differently in a challenging business world.

Problems in WAPDA:

Following are some of the problems existing in WAPDA which need to be addressed. Some
recommendations are also given with the problems

Problems with policies and vision & mission statements of WAPDA:

Though such problems seem bookish, but these statements are the directions of a firm for its
future. It’s nowhere mention in its vision and mission statements what WAPDA is looking
forward to do for water and electricity sector. Its mission and vision statements are in no way
related to water and energy sector. These statements are very generic in nature and provide no
direction for a specific sector.

Suggestion:

WAPDA should chalk out a vision and mission statements specific to their sector. They should
carry out research and investigate how countries such as India, Srilanka are dealing in their

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energy sector and develop policies which are in best interest to WAPDA and refrain from
political influence.

Problems and controversies on large purchases:

WAPDA purchases large quantities of electric meters and transformers, besides so many other
items required for generation, transmission or distribution operations. While it is WAPDA's
stance that it has been encouraging the local electrical and other industries, there have been
complaints that WAPDA has been making purchases at exorbitant prices and passing the burden
over to the customers.

Suggestion:

Process of purchasing such entities should be transparent and should be on merit.

WAPDA'S cost of power:

Due to electricity shortage per unit cost of electricity is increasing which is a major concern for
general public. Acute financial problems and liquidity crunch during the last three years. Power
Purchase agreements with the high cost IPPs, heavy outstanding dues from customers and
exceptionally high line losses were the main contributory reasons. As a consequence WAPDA's
Debt Servicing Liability (DSL) arrears to Government of Pakistan accumulated to Rs 36.4
billion.

Suggestion:

To reduce high cost of power WAPDA should collect its receivables from the provinces and
reduce theft and line losses. These steps will reduce power losses which will result in reduction
of taxation and cost of power.

High debt burden:

WAPDA has high debt burdens from provinces and its subsidiaries in all the provinces and
adjoining areas. Lack of investment, capital and resources hinders operations of WAPDA and as

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a result public has to face electricity shortage. Power Purchase agreements with the high cost
IPPs, heavy outstanding dues from customers and exceptionally high line losses were the main
contributory reasons. As a consequence WAPDA's Debt Servicing Liability (DSL) arrears to
Government of Pakistan accumulated to Rs 36.4 billion up to 30-6-1999. So if receivables were
not cleared, WAPDA would not be able to pay for fuel oil/ gas or to the IPPs and retire the short-
term loans

Suggestion:

Suggestion for this problem is to receive debt from provinces and subsidiaries in installments
rather than lump sum amounts.

Lack of updated technology:

WAPDA lacks updated technology which wastes a lot of resources in early process which
reduces cost of electricity production. An inefficient work environment means that WAPDA’s
operations and working capacities are not up to the mark. Weak R&D (WAPDA)" will have a
long-term negative impact on this entity, which subtracts from the entity's value.

Suggestion:

WAPDA should acquire latest technology to reduce losses of resources. They should latest
technology in production of electricity, and should use better electricity meter which can’t be
manipulated.

Weak supply chain:

Weak supply chain of WAPDA is also a concern. WAPDA frequently faces shortage of Furnace
Oil which causes electricity shortage. There has been no recent increase in the generation
capacity in KESC region of supply.

Suggestion:

As well all know there is a great shortage of electricity in summer; WAPDA should manage its
furnace oil supply beforehand instead of handling it on the spot. If there are issues of mistrust
between supply chain actors this issue will not be resolved until and unless trust issues are not
resolved. Supply chain actors should be kept in confidence regarding payments.

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Distribution Problems:
Now let us come to KESC’s distribution woes. The distribution network is not based only below
demand but on political intervention as well. Businessmen with close ties to government are
given favors in terms of greater electricity distribution for their firms. When greater amount of
electricity is distributed to firms on the basis of political influence, smaller firms and general
public face electricity shortage. Electricity is distributed on the basis of political decisions, voters
and constituencies. MNAs and MPAs use their influence to provide electricity to whom they
wish.

Suggestion:

WAPDA should distribute electricity to provinces in large quantities every province can manage
their electricity demand accordingly. It is easy to manage on smaller level i.e. provincial level
rather than national level.

Management Issues:
One more angle of KESC and WAPDA inefficiency is its management. The company was sold
to a private firm Messer KES Power and Others who took control of the company on November
29, 2005. The new management employed Siemens Pakistan Engineering Limited as
the Operations and Management (O&M) Contractor. This includes generation, transmission,
distribution, maintenance etc. KESC of old days was highly unionized and the labor is naturally
wary of working with the new employers.

Suggestion:

Corrupt officers should be fired from their posts and face the trials. Proper training sessions
should be held to train the management.

Theft problems:
Non-billing or non-payment of bills in most of the areas of the country which include especially
NWFP, Azad Kashmir, and Baluchistan. ‘Kundi System’ (stealing of electricity) in many areas
with or without the connivance of the WAPDA and KESC staff. This theft happens in three
ways:

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  KESC clients who already have connections, bypass the electricity meters. Few years ago
KESC was being run by the Army and even they couldn’t stop the power theft inspite of
moving electricity meters of most of the city out on the streets. This was done to ensure
the meters are not tempered with.

 Industrial clients who are billed according to a sanctioned load use bigger grips to get
more power

 People use Kundas (hooks) on distribution lines.

Suggestion:

WAPDA should deal severely and strictly with culprits by disconnecting their electricity supply.
There should be heavy financial and prison penalties in real for the culprits. Line losses are a
main source of electricity shortage. Dealing with this problem is a major concern.

Extra Privileges for employees:

Top management of WAPDA are privileged with free units of electricity. In a situation of power
crisis in country such privileges create much burden for the public.
Suggestions:
Quota of these privileges should be reduced and should be given to only higher rank officials
only and also apply limits on how much their employees consume units.

Power Crisis:
Power crisis is itself not a problem but an outcome of all the above discussed problems. As a
result of all those problems public has to face load shedding as long as 16-18 hrs. a day.
Suggestions:
To solve this problem a collective effort is required by the govt., WAPDA, and the public to use
electricity in an efficient way, not to waste power, not to steal electricity and eliminate
corruption at all levels.

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Leadership Problems:
Leader and top management in WAPDA are important for the organizations to utilize pioneers
who have diverse aptitudes in various territories and have a capacity to execute those abilities.
WAPDA administration, rather than taking enthusiasm to accomplish WAPDA objectives and
targets, effectively partaking in legislative issues and other political intercessions. The vast
majority of the top administration of PIA is included in various bags and defilement cases and
for the most part take part in governmental issues only for their own particular advantage. This
would hurt the WAPDA's position severely.

Suggestions:
Top administration of WAPDA ought to stay away from to politics in legislative issues and the
legislature ought to utilize those pioneers or administration who did not include in any kind of
defilement or other illicit cases. Government ought to hire people on legitimacy and merit
premise as opposed to utilizing their own relatives or companions who are even not qualified for
the position.
Other Problems:
 Top to bottom corruption in WAPDA and KESC.
 Running of WAPDA and KESC unlike a business.
 Taxes, surcharges, etc. other than the electricity tariff.
 Unjust contracts with IPPs (Independent Power Producers) to buy electricity at a fixed
non-market rate.
Suggestions:

Corrupt officials should be fired from there designations. Govt. should decentralize operations of
WAPDA, so the organization can work flexibly without intervention of political members.

Other Suggestions:

Following are some other suggestions related to WAPDA.

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Bulk power sale to KESC:

WAPDA has been supply power in bulk to KESC for the last many years. The rate that WAPDA
collects from KESC and the timing of the collection are not a commercially viable preposition.
The arrangement must be revised, to make it sustainable on long-term basis. WAPDA supply
ranges from 250MW to 450 MW, and in some cases KESC is supplied power though WAPDA
own system is in shortage and experiencing black outs. According to WAPDA, occasional load
shedding in Karachi might be attributed to KESC's local system constraints and WAPDA should
not be unduly blamed for it. As regards supply 300-megawatt electricity to KESC throughout the
year, WAPDA has reportedly expressed its inability. Future commercial relationship between
KESC and WAPDA's companies should be worked out in due course. A lot of work would be
required to agree on the arrangements particularly the tariff for power delivered.

Bulk power purchase from PAEC:

Pakistan Atomic Energy Commission (PAEC) sells power to WAPDA, generated from Chashma
nuclear power project (Chashnupp), a 300MW plant that became operational during 2000. PAEC
wanted higher tariff but WAPDA resisted, as it would entail further burden its consumers. Now
the government has fixed Rs 2.25 per kwh for the electricity being supplied to WAPDA from
Chashnupp from this fiscal year till the useful life of the plant. However, Chashnupp tariff would
be reviewed after every four years as per prevailing exchange rate, including changes in
operational and maintenance costs. It has been reportedly agreed that WAPDA would pay the
following rates to Chashnupp for purchase: a) Rs 1.75 per kWh from September 15, 2000 to
December 31, 2000; b) Rs 2.05 per kwh from January 01, 2001 to June 30, 2002; and c) Rs 2.25
per kwh from July 1, 2002, till the life of the project. PAEC has plans to add two new power
plants, one at Karachi and the other at Chashma. It will be appropriate that PAEC registers with
NEPRA as a power generation company (GENCO) and gets its tariff approved through
determination process prescribed for all generation companies. This will also be good for PAEC
by improving control on costs in business-like manner and efficient generation.

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WAPDA receivables from the provinces:

In end November 2001, the President reportedly directed all the governors to clear Rs36 billion
provincial electricity dues by Dec 31, 2001 and reconcile disputed amounts with WAPDA within
90 days of bill issue date. The President reportedly was chairing the meeting that was attended
by four provincial governors, Chairman and members of WAPDA, federal ministers and the
concerned secretaries. The governors spoke of cash shortfall of their provinces and other
outstanding issues with WAPDA. It was said that, of the total Rs36 billion, the WAPDA
receivables towards four provinces amounted to Rs26 billion and Rs10 billion towards KESC. It
was also said that huge receivables had created cash flow problems for the utility. It had to
borrow high-cost, short-term loans to meet this Rs36 billion cash deficit. So if receivables were
not cleared, WAPDA would not be able to pay for fuel oil/ gas or to the IPPs and retire the short-
term loans. In a subsequent meeting, the President directed WAPDA to pay hydel royalty of Rs
4.1 billion to the NWFP during the month. It is believed that most of the matters have been
resolved amicably.

To avoid further accumulation of WAPDA receivables, WAPDA should be authorized to

disconnect the electricity of all government departments, educational institutions and residence
of all officers on non-payment of utility bills. WAPDA should also be authorized to disconnect
electricity of residences of the HC judges, offices of irrigation and power, and water supply and
drainage offices and all other departments who are defaulters of electricity bill payments.

Fuel oil purchase arrangements:

WAPDA should manage its Furnace Oil efficiently to manage its supply chain in a better way.
Furnace Oil is a major source of Electricity production in Pakistan and should be purchased and
managed effectively predicting the usage of electricity in coming weeks and months.

Private production and distribution of electricity:

Private parties be allowed to generate and distribute electricity independently of WAPDA and
KESC. This will create an environment of competition forcing WAPDA and KESC to provide
cheaper electricity and better service to the customers.

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As a first step the distribution of electricity be privatized at small scale. The parties that
distribute electricity in their respective limited areas will ensure billing and its payment. This
will extraordinarily minimize electricity theft and non-payment, and by making the staff
accountable and efficient, will result in better customer services.

-Production of electricity from other viable sources such as production from wind, coal and solar
energy.

-Dams should be constructed for longer term benefits.

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