Previous flawed decisions hampering improvement in power sector?


ISLAMABAD: Pakistan’s power sector has shown little, if any, sign of improvement in decades due to the irreversibility of past flawed decisions including contracts signed under the umbrella of the China Pakistan Economic Corridor (CPEC) that favour the Independent Power Producers (IPPs), coupled with the policy of net metering allowed for solarisation thereby overburdening the remaining consumers through ever rising tariffs to meet full cost recovery objectives specified by multilateral lenders including International Monetary Fund (IMF), World Bank (WB) and Asian Development Bank (ABD).

In addition, informed sources told this correspondent, there is the element of low capacity of “generalists” sitting in the Power Division, misbalance in investment in the system, politically-backed board of companies, almost zero reforms, non-cooperation of provinces against theft and mass corruption and unrealistic targets set by ‘donor’ agencies.

This was the crux of background meetings with retired officials of power sector, experts and private sector now clamouring for rationalisation of tariff.

Currently, power sector circular debt is over Rs 2.6 trillion due to Transmission and Distribution (T&D) losses as actual T&D losses are much higher than the allowed T&D losses for FY 2022-23, which is 12.21%.

The power sector Regulator, Nepra, being a public sector organisation has shown a partiality for government entities that translated into not taking any punitive action for not following instructions.

The regulator; however, maintains that it has been continuously been highlighting governance issues in Discos which are required to be addressed to reduce losses, which are resulting in ballooning of the circular debt. However, no significant improvement has been witnessed on the part of some Discos in this regard.

The bureaucrats sitting in the Power Division are familiar with the sector’s weaknesses but do not have remedies because of their own low capacity to deal with chronic issues. Their main interests are in overseas tours, membership on Boards, and cars from subordinate companies despite receiving monetisation from the federal government.

Ministers’ incharge of Power Division are non-technical and totally rely on advice of bureaucrats or people of their own choice, whom they bring from other departments for “confidential matters” or “matters of personal interest”.

Power sector experts argue that the main focus of successive governments has been increasing generation capacity due to political considerations and personal financial interests. This is why the country’s transmission is still unable to transmit more than 26,000 MW of electricity despite the fact that demand is about 34000 MW or 35000 MW and dependable capacity is 36,000 MW while installed capacity is 39,000 MW.

The Boards of Companies; i.e., Discos and Gencos are usually selected for their connections with senior members of the sitting government, serving top bureaucrats of Power Division, instead of their professional qualifications and capacities. This is the reason why with each passing day the general public faces an increase in energy related problems.

The latest example of Power Division’s failure is that Boards of Discos, which were constituted on the recommendations of ‘PDM-1 government’, have been declared ineligible for appointment of new Boards in ‘PDM-2 government’.

Power Division recently projected that given the dismal state of affairs, the Discos may make a loss of about Rs 589 billion during the current fiscal year. However, no action has been suggested against those bureaucrats, or relevant minister(s) who recommended and approved the names of those on the boards of these Discos. International financial institutions like WB, IMF and ABD demand an increase in tariffs to minimise losses but have yet to refuse to extend loans due to dismal performance. Some projects funded by the WB came under tight scrutiny as contract awarding process was not transparent.

According to experts, another aspect of the dismal performance of power sector distribution companies is non-cooperation of provinces for action against power thieves, especially in Sindh, KPK and Balochistan.

One sector expert suggested to this correspondent that the Power Division be handed over to power sector experts and a Power Advisory Council (PAC) be set up to give advice to the government on the same lines as the Economic Advisory Council (EAC), adding that power sector’s performance can destroy the economy or revive it.

Other experts suggested that power sector companies should be privatised or their management contracts be given to the private sector whereas another opinion is that since the government is still feeding K-Electric (KE) from public sector resources, privatised Discos will continue to be a financial burden on the national budget.

They also suggested that investment should now focus made on improvement of distribution and transmission systems and government should abandon investment on generation especially that based on imported fuels.

“Presently, dipping demand and rising electricity cost is resulting in further inflation. Capacity payments and price rationalisation are key issues,” said another expert.

Story by Mushtaq Ghumman

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