The second energy conference, this time held in Lahore, in less than three years was as much a reiteration of recommendations made during the first conference as it was an acknowledgement of the failure to implement those recommendations. Be that as it may, one major decision was taken during the second conference that was not a component of the first one: equitable loadshedding among provinces, a demand made repeatedly by Chief Minister Punjab Shahbaz Sharif in his inimitable passionate style.
It is unclear whether there would be equitable loadshedding between urban and rural areas within a province. However, there is no doubt that the federal government can deliver on this decision as the national grid is under its jurisdiction. Obviously, the Ministry of Water and Power could not present the data and may not have a transparent system to enforce equitable loadshedding. Otherwise, the Federal Government as a neutral umpire would have been more judicious. Shahbaz's demand that denying electricity to Distribution and Transmission Companies (Discos) that are efficiently managed and equating them with Discos that do not amounts to penalising those who pay on time is quite valid.
Punjab's additional demand to ensure uninterrupted supply of 207 MMCFD gas to four independent power producers to supplement electricity supply requires shifting of gas supply from fertiliser plants or shutting down of CNG stations on the Sui Northern Gas Pipeline (SNGPL) system. Unfortunately, however, no final decision could be taken due to a lack of consensus within Punjab. These four IPPs will need to be given diesel which is even more expensive than high sulphur furnace oil (HSFO) that is four times of the gas tariff. This would mean an additional burden of Rs 100 billion or more on Pepco as fuel is a pass-through component in the cost. All other decisions taken at the moot were focused on lowering demand.
The failure to implement the demand-related first energy conference recommendations is attributable largely to the provinces without whose co-operation the recommendations had remained unimplemented. Punjab was the only province where shop closure at 8:00 pm was enforced. However, with Punjab's refusal to give two days off a week to its bureaucrats after the first conference, the expected savings simply did not materialise. Some economists may well argue that the loss of output from an entire day off for our bureaucracy must be offset by the benefits that would accrue from lower demand. True, but it is critical to determine which sector/group would benefit from lower electricity demand?
Would lower demand translate into lower loadshedding across-the-board or would it be focused on the productive sectors that may grease the wheels of the economy through increasing output as well as employment levels. In short a critical decision would have to be taken to select the sector/group of people that would benefit from lower electricity demand - a decision that requires a cost benefit analysis from the point of view of the entire economy. Given the onset of general elections there is a perception that householders may benefit at the cost of the productive sectors, a perception that requires clarification by the government.
The decision to close all shops at 8 pm is a reasonable one, given the fact that shops in other countries including Western countries do shut down around that time, with the exception of pharmacies, yet somehow in Pakistan the tradition is to open shops at noon and to keep them open till the late hours. The likelihood of implementation of this decision remains suspected as the Sindh Chief Minister Qaim Ali Shah expressed his reservations immediately after the conference ended.
Facts show that Punjab's consumption of electricity is over 66 percent of the demand. Lahore alone accounts for 20 percent. Therefore, shutting down factories for two days instead of one in Sindh will still not be sufficient for supply of natural gas to supplement electricity supply to Punjab. As a matter of fact, besides Sindh; both Khyber-Pakhtunkhwa and Balochistan were not in favour of this proposition. Providing more HSFO to existing thermal plants is for the next 90 days - until synthetic natural gas comes on stream to enhance natural gas supply - appears to be the only feasible option. Otherwise, an even darker Pakistan in this summer looks a reality.
Unfortunately, no consensus was reached on the two major causes of the energy crisis during the conference. The first is the inter-circular debt that continues to inhibit liquidity in the sector compromising the ability of power generators to operate at maximum capacity. This needs to be urgently dealt with. The federal government's attempts to establish a holding company as well as to compel banks to increase their exposure to the energy sector (an exposure that banks maintain has reached 30 percent beyond which they would not be comfortable with) has not resolved the issue.
The government needs to ensure that generation companies produce at maximum capacity and simultaneously deduct money owed by provincial governments and its allied departments from the Federal consolidated fund that have large unpaid bills. Additionally, distribution and transmission losses must be severely dealt with and the Prime Minister did indicate that the parliament would legislate on power theft - a legislation that has remained pending for over four years.
The policy of massive budgetary injection (one trillion rupees in four years) to ensure there is no inter-disco tariff differential must also be abandoned allowing better performers not to subsidise the rates charged by poor performers. This is only possible if the Discos are handed over to the provinces. Paying off existing circular debt is possible by dividing the load between the Federal Government and provincial governments as per formula provided in the 7th NFC Award. Sitting and negotiating with the value-added industries located in the industrial estates to partly shoulder the burden is also possible. Perhaps a dedicated task force report on clearing the circular debt and reduce its further creation is needed. The Council of Common Interest is the forum for a final consensus decision on this issue.
The Prime Minister did indicate in the post-conference talk with the media that implementation would begin after the stakeholders were taken into confidence. The bottom-up approach has rarely been followed by our governments, civilian and military, and perhaps it is time to acknowledge that the success of a top-down approach has been poor in this country, as in others.
Until we enforce price parity between different fuels and across users, the fight for locally produced natural gas at cheap prices between the provinces and consumers would persist. Imposition of a gas levy on domestic gas and equating it with imported LNG and LPG needs to be put in a special account to develop local infrastructure and boost the output of domestic sources of energy. This fund needs to be managed by a National Energy Board manned by professionals and answerable to the CCI.
We are afraid that the energy moot in Lahore failed to recognise that the power crisis has two dimensions; the provision of energy and the cost of provision. Both have one solution; boosting local sources - be it from natural gas, coal, hydel, solar wind, etc. The conference may appear to be a face-saving for the two major political parties, ie, the PPP and PML (N) competing for the heartland of Pakistan (Punjab) but political compromises by the provinces that were so direly needed were missing. We are certain that without this, bold economic decisions cannot be taken and if at all taken, simply cannot be implemented.
The situation also underscores the need for examining excessive and burdensome government policies and regulations that thwart efforts aimed at expanding and advancing energy infrastructure and development. The PPP-led government can do it because a party that is apparently not on a losing wicket will have the guts to take bold economic decisions needed to rescue economy mainly through achieving energy security which is so critical for the real economy and jobs.
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