EVALUATION OF POWER PROJECTS NEED FOR A FLEXIBLE APPROACH

Scarcity of funds has been a major factor in the decision making and evaluation of power projects. This is all the more relevant in developing countries where different sectors compete for the limited resources and in general adhocism prevails over the long-term objectives of the country. Project evaluation is done at a number of stages including at the inception level, at prefeasibility and feasibility level and ultimately at the top of hierarchy (ministry level) for the final approval and goahead for implementation. At all these stages, the projects are tested for their economic and financial robustness, and the projects which are technically sound and -satisfy some laid down criteria for economic and financial returns are recommended for implementation. At the ministry level, however, more consideration is given to the financial indicators while deciding about the project. The treatment, at ministry level is what the main concern of this paper is. Use of financial analysis as a "black box" in deciding about the fate of the projects and short term strategies on many occasions, esulted in recommending those projects which may not be in line with the long term objectives of the country. The case in point is evaluation of thermal and hydel projects with specific reference to Pakistan. Pakistan is amongst.the countries having lowest per capita consumption of electricity in the world. Although abundant hydel power potential is available in Pakistan, yet due to the rigid evaluation indicators the emphasis is on fossil fuel based thermal plants for short as well as long term plans, whereas hydel projects are being put-aside only due to the reason of bigger financial crunch. This is not only increasing dependance of the country on the oil imports but adding to the environmental and atmospheric degradation which is so harmful for future. The paper stresses the need for evaluation criteria which are flexible enough to accommodate the emerging priorities for use of indigenous resources, environment preferences and take into consideration such factors like longer life of the projects and other hidden social benefits.