The Chief Justice of Pakistan queried as to why the government had failed to optimise the generation capacity of Independent Power Producers (IPPs) reliant on sources other than gas for fuel rather than on Rental Power Projects (RPPs) in spite of being fully cognisant of the looming gas shortages in the country. This question was raised repeatedly both in the media, with Business Recorder in the forefront, as well as by the independent third party audit insisted on by the then Finance Minister, Shaukat Tarin, during a cabinet meeting. The audit report also highlighted other critical failings in the RPP contracts signed by the government, notably the changing of the terms of reference after the bids were received in violation of the Public Procurement Regulatory Authority rules and agreement to give the RPPs full payment for capacity generation even if an RPP was unable to operate at that level because of the inability of the government to provide the necessary gas. And surprisingly, the audit report also concluded that a far better option would be for the government to support full capacity generation, estimated at 2000 MW, from the existing generation plants as well as 1133 MW untapped energy from the IPPs which would ensure minimal loadshedding. The fact that the government opted for RPPs notwithstanding that such support defied any economic rationale was a reflection of the fact, in the words of Faisal Saleh Hayat of the PML (Q), that the main objective of the RPPs was not to meet the energy shortfall but to make some influential individuals extremely wealthy. In this context, it is relevant to note that federal Finance Minister Dr Hafeez Sheikh, while inaugurating the three-day 27th annual general meeting of Pakistan Society of Development Economists (PSDE) arranged by the Pakistan Institute of Development Economics acknowledged the role of the Chief Justice in generating 100 billion rupees through speedy disposal of cases. In November this year, the Supreme Court ordered Reshma Power Plant to return 4.5 billion rupees to the government which it took as mobilisation advance two and half years ago. The Supreme Court has reserved its judgement in this case and one would hope that the country will be able to retrieve some of the money inappropriately spent on this sector. Dr Sheikh also noted during the PSDE meeting that it was imperative to begin implementation of the stalled power sector reforms that, together with failure to implement the agreed taxation reforms, account for the International Monetary Fund's decision not to release the last two tranches of the November 2008 Stand-By Arrangement. What has been untenable for the people of Pakistan is the fact that the government opted to periodically raise tariffs during the three-year period as part of these reforms but failed to either manage loadshedding or indeed bring in efficiencies to curtail the above average line losses. Critics also argue that the government appears to continue to ignore the third party audit recommendation to revisit its energy mix to ensure that scarce domestic fuels are replaced by those that are cheap and easy to access. In this context, Dr Sheikh's revelation that the government has subsidised the energy sector to the tune of one trillion rupees during the past three years would find no sympathisers - the public is unlikely to overlook continued heavy loadshedding with ever-rising bills and the donors are unlikely to overlook inefficiencies and failure to begin implementation of reforms that would seek to deal with perennial problems in the sector including the inter-circular debt attributed mainly to failure to get government departments/ministries to pay their bills. To compound the problem Dr Sheikh admitted the poor performance of state-owned entities that periodically require massive bailout packages which the government can ill-afford because country's rich and influential refuse to pay taxes, either by citing the constitution that exempts the rich landlords from paying income tax, or through exemptions granted to other wealthy sectors. The foregoing does conclusively prove that the government in general and Dr Sheikh in particular are fully cognisant of the identified reforms that are urgently required to turn the economy around. As matters stand today, the country's deficit is likely to be higher than the 7.56 percent the incumbent government inherited due to the unlikelihood of the government receiving any part of the 117.8 billion rupees budgeted as funds for programme lending in the current year due to: (i) failure to get a letter of comfort from the IMF or undertake identified macroeconomic reforms that were explicitly required by other donor agencies prior to extending programme (budgetary) support, and (ii) the escalating conflict with the US with lawmakers slashing assistance to Pakistan by 700 million dollars; while this bill maybe vetoed by President Obama, yet the time for complacency is past. Tarin's famous nine-point economic reforms agenda still remains unimplemented. Our escalating economic woes are clearly due to our government's unwillingness to act swiftly and appropriately, a recipe for disaster. Copyright Business Recorder, 2011
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