Power sector’s performance is no longer simply a source of concern for the domestic, industrial or commercial sectors but has become a source of aggravated concern, an anecdotal survey of Pakistan’s power consumers reveals. And the fault for the worsening situation, such is the consensus, lies with the caretakers.
This would surprise critics of the Pakistan People’s Party Parliamentarians (PPPP) who had continued to argue that gross mismanagement due to nepotism, outright corruption, theft and inadequate technical knowledge and experience by those appointed at the helm to run the Water and Power Ministry were some of the main reasons behind the widening demand-supply shortages. The PPP-led coalition government in its defence maintained that blame for power shortages must lie with the previous governments for failing to add to the generational capacity and extolled the virtues of the Independent Producer Producers (IPPs) approved in 1994 by the Benazir Bhutto government. The counter argument is that five years is a sufficiently long time to have implemented power sector reforms at least in terms of improved governance while acknowledging that mega dam construction takes time; in addition the IPPs fuelled by furnace oil shifted the energy mix of the country in favour of the more expensive fuel source and to add insult to injury instead of diverting furnace oil from the grossly inefficiently-run generation companies (Gencos) and into the more efficiently run IPPs the government continued to throw away good money after bad by supplies to Gencos, so argues Dr Musaddiq Malik, Caretaker Minister for Water and Power. In effect, the former government through this policy contributed to the liquidity problems of the sector through a swelling circular debt compelling the government to fund Pakistan State Oil (PSO) fuel imports. The circular debt is also attributed to the government (federal as well as provincial), allowing unpaid bills to soar to around 80 billion rupees.
So what is the actual situation and who is at fault for the current situation? The caretaker Prime Minister took oath on 25th March this year and his cabinet was not sworn in till 2nd April. Dr Musaddiq Malik was given the Water and Power portfolio and he has been much in the news since.
On 3rd April Dr Malik rather optimistically stated that his priority would be a reduction in loadshedding. He was briefed soon after where he was informed of all that ails the sector including the over 10 terror attacks that have disrupted supplies aggravating load shedding including the attacks on Sheikh Muhammadi Grid station in recent weeks. At the same time he talked to Discos chief executive officers and directed them to improve their performance. But he acknowledges that this is unlikely until and unless the country legislates strict punishment for members of Discos board of directors found guilty of benefiting themselves.
Dr Musaddiq Malik, however, is upbeat that he can considerably reduce load shedding even though he maintains that the power sector is not suffering from structural problems as identified by the multilaterals but from structured problems thereby referring to intent by those who are in a position to power to continue to abuse the system for personal gain. As an example Dr Malik stated that he sought 150 mmcfd gas from the Petroleum Ministry and the relevant caretaker minister agreed to this a few days ago; however, the power sector has not been able to extend more than 55 mmcfd daily which he claims just goes to show the problem is structured, not structural.
He suggests support in the following four areas: (i) compel the federal and provincial government ministries/departments to clear their bills through cutting resources at source; he argues that the 150 billion rupees requested by his Ministry can be met by cutting the 80 or so billion rupees owed by the state non-payers at source while FBR should also release an estimated 10 billion rupees due as rebate; (ii) the furnace oil supplies be diverted from poorly performing Gencos to IPPs which would save around 3 billion a day and meet energy shortage; (iii) transmission losses of 3.6 percent this year as against the allowed 2.5 percent should be rigorously adhered to which would generate enough electricity to meet the demands of two small provinces; and finally (iv) full cost recovery must be implemented. At present, the cost of producing electricity is 16 rupees per unit while it is being sold at 12 rupees though the bulk of being sold at much less. He advises targeted subsidies, a suggestion common with that proposed by multilaterals.
There is also a need to begin disconnecting connections of all those in the private sector whose bills remain unpaid starting with those who used their political influence to compel the relevant authorities to pay arrears of crores of rupees in ridiculously small monthly instalments as in the case of former Foreign Minister Hina Rabbani Khar’s husband. And captive power plants are receiving gas at the same rate as the subsidised fertilizer sector and consequently their per unit energy cost is 5 rupees per unit while they are selling it at 12 rupees per unit. In addition, captive power plants access electricity from Wapda at Rs 9 per unit while they sell it at 12 rupees, thereby raking in profit and this matter is currently being investigated by National Accountability Bureau. This too must stop.
Dr Malik’s suggestions are not out of the box solutions as they were proposed previously but they were not implemented due to political compulsions in the past; perhaps, political pundits argue, they can be implemented by a caretaker government which definitely at least has no political compulsions. But that is untrue. The caretakers are struggling against what is being seen as concerted efforts to derail the elections through terror attacks, focused till now on the three parties that formed the coalition government that completed its constitutional mandate on 16th March this year, as well as on disrupting fuel supply lines which, it is feared, may bring angry and disgruntled mobs out on the streets that may seriously compromise the May 11 elections. The challenges are many but the ray of hope is that solutions are present and all it requires is a firm political commitment to implement them. The right time to implement these solutions is as soon as the newly-elected government comes to power as time would be on its side with people forgetting the cost escalation if provided uninterrupted power supplies five years down the line.
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Anjum Ibrahim
Anjum Ibrahim, "The power sector," Business recorder. 2013-04-29.Keywords: Social issues , Social needs , Social problems , Social development , Energy shortfall , Energy crisis , Power reforms , Pakistan