Prime Minister Yousuf Raza Gilani has formed a task force under the chairmanship of federal Finance Minister Dr Hafeez Sheikh with salutary terms of reference: to address energy issues and transform public sector entities (PSEs) from loss-making units heavily reliant on bailout packages throughout the year to profit-making units. There is no question about the urgent need to implement identified reforms in the power system as well as identified measures to turn loss-making units around - identified and presented to the cabinet not only in 2008, when the government opted to go on the International Monetary Fund's (IMF) Stand-By Arrangement (with an entire range of associated reform conditions) but again by end 2009 when the then Finance Minister Shaukat Tarin presented an austerity package to the cabinet; yet these identified reforms are still not implemented. What is more disturbing is the fact that the cabinet has approved these identified reforms and yet failed to implement them. Power sector reforms to date have failed, because the government's implementation was selective. Thus the public has witnessed a dramatic rise in utility rates in consonance with the argument presented by the multilaterals that full cost recovery is critical for the sector to enable it to be economically viable, while the government has consistently failed to forcefully enforce its decision to cut off electricity connections to those government departments/ministries (federal/provincial/federally administered tribal areas) that do not pay their bills promptly. Additionally line-losses, three to four percentage points higher than considered acceptable, need to be tackled on an emergent basis. This in effect, implies that the inter-circular debt has not been dealt with - a debt that continues to account for severe liquidity constraints within the power sub-sectors compromising their ability to pay for necessary imports. Research papers gathering dust in the Ministry of Water and Power as well as the third party audit undertaken on the controversial rental power projects RPPs) further recommend that Pakistan's fuel mix needs to be revisited: more expensive fuels like furnace oil and scarce domestic gas (major fuel for most of the RPPs incidentally) need to be gradually reduced as part of the country's total fuel mix to cheaper fuels like hydel and coal. As far as the public sector entities (PSEs) are concerned it is relevant to note that for the past three years and a quarter, it is the executive that has been found guilty repeatedly of not only making senior appointments on the basis of nepotism but also using these entities as recruitment centres for its supporters. Poor management coupled with corruption accounts for over-employment that is effectively eroding the resource base necessary for running any PSE. The result is for all to see: over 300 billion rupee injections per annum into these entities to keep them barely float - money that the government can ill-afford. What is ironical is the recent statement by Dr Sheikh expressing gratitude to the Supreme Court for generating 100 billion rupees for the federal kitty through taking appropriate decisions on corruption cases and violation of public procurement rules. A plethora of studies recommending specific reforms accompanied by approvals granted by the cabinet as well as the Economic Co-ordination Committee, the highest economic decision-making body in the country, are simply not implemented. The reason is obvious: lack of political will because it is argued that the political cost of some reforms would be too high for any political party. Be that as it may the government needs to note that the collapse of one PSE after another and the rising utility bills without a decrease in electricity and gas loadshedding would be more costly in political terms. In other words it is time for implementation and not in setting up yet another task force which is hardly likely to come up with any innovative measure. Copyright Business Recorder, 2011
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