Last week, the media was abuzz about SAPM on power and petroleum Tabish Gauhar’s letter that he addressed to his minister Hammad Azhar. The gist of the ‘leaked’ letter and any spirit of debate were lost in the media hype created around the differences within energy ministry or largely within the government. But we often forget that difference of opinion is a democratic norm and a healthy debate can only lead to advancement. Secondly, the kind of mess the energy sector is in, it cannot be solved without challenging the status quo and vested interests. Thirdly, it should be encouraged that a set of reforms is being presented by an expert within the government and not by multilateral and donor agencies. Finally, it seems that the current team (both the minister and SAPM) is keen on revitalizing the energy sector—which ought to be the ultimate goal.
Having said that, the SAPM should focus on reforming within the sector, rather than bringing everything in the public domain. A delicate balance is missing. For readers, it is important to look at the message not on the messenger. The current energy team is keen on instilling the right reforms. This is a clear departure from sweeping things under the rug under previous regimes. For instance, it is the first time a government representative openly talked about the growing gas circular debt, and its impact on companies in the upstream – like OGDC, PPL, and refineries.
Many of the reforms in the power and petroleum sector had been initiated on paper in the first 2.5 years by the previous energy team. What was missing was walking the talk. The desperation to kick-start reforms is reflected in Tabish’s letter. Clearly, energy sector’s woes in Pakistan cannot be resolved amicably. The sector needs a maverick. Someone who talks and acts beyond cosmetics and lip service. Someone who needs to go beyond the firefighting. And the media needs to depart from its relentless debate on RLNG spot buying or bi-weekly petroleum pricing toward discussing and highlighting deep structural issues which are plaguing the country.
An expert — who is an SAPM or a sector specialist working in the ministry — should not care about politics. They are supposed to be experts and should be working on reforms. Politics should be left to the minister. The incumbent minister is learning fast and has political weight within the party. The ‘good and bad cop’ strategy may work in a sector where there is sheer resistance to reforms.
It is the bureaucracy which is defending the status quo. The fear of NAB (or broader accountability) is prohibiting bold steps from being taken. That is the first resistance that needs to break. For example, sources suggest that the consumer tariff rationalization by restructuring/reprofiling of debt servicing for five years of the 2015 power projects (including CPEC) is strongly resisted by bureaucracy on the premise that NAB in future may raise questions over payment of higher amounts in gross terms over the loan tenor. Although, the officials do understand the Net Present Value (NPV) concept (nothing rocket science about it) and they do comprehend that the bigger issue is today’s cash flows which is building up the circular debt, they still don’t want to do what is needed.
When such mentality exists, the reformer has no choice but to open the debate. But that does not mean the fear of officials is uncalled for. Their reputation is at stake and someone at the top should protect their team. Energy minister is doing so. The case in hand is the fiasco of recent LNG spot buying and the way the Energy Minister covered the backs of PSO and PLL teams is commendable. Leadership should come from the top.
Meanwhile, the vested interests in the private sector are using all the lobbying power they possess to resist reforms. Everyone is interested in their chunk without internalizing the impact of that on the broader economy. The fight on the RLNG terminals is one where existing terminal holders are resisting new terminals, and the newbies don’t want expansion of the existing ones. At the same time, gas marketing public companies are resisting private sector as they fear losing better clients to the private sector. Interestingly, ministers (outside the sector) are taking a position in it and making the matter worse. These ministers had issues with the previous SAPM Nadeem Baber and now they are at loggerheads with the existing one. Here the role of Energy Minister is important to take the battle with his fellow politicians.
After establishing the fact that the energy sector is in a rotten state, and reforms can be introduced by having everyone on board (or by developing consensus), SAPM and non-political specialists should work on digging trenches to get the work done. The current SAPM may need to show some emotional intelligence and need to understand issues of other parties and constraints and work on resolving those by using his experience and intelligence.
There exist some plausible questions about Tabish’s expertise in the petroleum sector. But there is no doubt on his ability in the power sector. K-Electric turnaround in his time is manifestation of it; it clearly shows that he is a doer. But he needs to give room and trust his minister. Unlike Nadeem Babar-Omer Ayub duo, where the minister had preferred to remain in shadows, the current minister’s aim is to lead from the front. There cannot be two captains of one ship.
In the first half of this government, Nadeem Babar (though was SAPM on petroleum) was effectively running the power sector show as well. Now the case is quite different. Hammad is showing his resolve. And he is an elected representative. If he and PM think that they need more specialist hands in the ministry, they should go for it.
There is no doubt that power and petroleum sectors are integrated as any decision on one has externalities on the other. For example, in the power sector, if furnace oil is to be imported when LNG prices are skyrocketing (a rule of thumb is that at over 14.5% of Brent LNG price, running FO plants is viable despite the difference in efficiencies), its impact on petrol/diesel supply (petroleum subject) needs to be evaluated, especially in a country where port capacity to handle oil products is severely tested. Here a side message for the minister of maritime is to focus on his job, rather than showing unwarranted interest in petroleum matters.
Energy is a complex ministry and has strong interlinkages with other areas (like finance and maritime); it needs more specialist on the team to strengthen it. Tabish may be frustrated (rightly so) because of resistance within and outside ministry, but he may also be overstressed by having too much on his plate. The PM and Energy Minister may need to ponder upon the option to strengthen the team and bring more specialists (as SAPM or in other form) in the petroleum sector to support the existing team.