VZCZCXRO8024
RR RUEHLH RUEHPW
DE RUEHLH #0164/01 2201024
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 
 
¶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