Power crisis: new steps

The portfolio swap between Chaudhry Ahmed Mukhtar and Naveed Qamar was desirable, given the fact that sustained massive energy shortages account for ongoing street protests. The new Minister for Water and Power, Chaudhry Mukhtar, was no doubt instrumental in the Prime Minister's decision to give walking papers to Managing Director of Pakistan Electric Power Company Rasul Khan Mahsud and to give two weeks to Secretary Water and Power and Chairman Wapda to improve their performance or else face dire consequences. Globally, governments decide to make heads roll for lack of performance, and in some instances, dismiss functionaries where a scapegoat is required. The question is whether the decision to dismiss the Pepco MD and give a two-week notice to the Secretary and Chairman Wapda is plausible. There is an entire host of recommended reforms that have been identified not only by several multilaterals engaged in our power sector but also by bilaterals, notably the United States, what requires to be done on an emergent basis. In the words of our bilateral and multilateral assistance providers to the energy sector; the sluggish power sector reforms, unsustainable subsidies, bad policymaking and market distortions combined with poor investment in energy sector are the main reasons behind the energy crisis. It is improbable to argue that the Secretary, Water and Power and/or Chairman Wapda have either the required wherewithal to resolve these issues independently or resolve these in two weeks. At present, transmission and distribution losses are around 30 to 40 percent according to some estimates, not only due to lack of investment in the antiquated transmission lines but also due to incessant power theft by various groups - powerful as well as the poor. In addition, about 20 percent or so of all electricity bills are simply not cleared on a monthly basis with the biggest offenders being ministries - federal as well as provincial - and Fata. While improving transmission lines requires investment and time yet allowing the supplier to be paid bills in full requires government support, which can be provided through empowering the Ministry of Finance to cut the amount of the bills due at source. This has to be a cabinet-level decision and not at the level of any specific ministry. Subsidies are largely allocated for inter-disco tariff differential - 412 billion rupees in 2011-12 against the budgeted 50 billion rupees - and this effectively is a subsidy for the inefficiently run discos. While the government cannot politically allow more expensive electricity to the poorer parts of the country where disco costs are higher, yet some mechanism needs to be evolved that would ensure this subsidy is reduced as it is not only considered economically inefficient. While it takes away incentive for the disco to improve its performance, it is also a drain on the country's scarce resources with repercussions on the government's ability to spend on other social sectors including health and education. This decision too has to be taken at the cabinet level. There is also an emergent need to resolve the inter-circular debt which again is not doable either by the MD Pepco or indeed by the Secretary Water and Power. That requires support from the Ministry of Finance, a fact which was tacitly acknowledged by the Prime Minister, which is why the three-member committee directed to look into ways of resolving the energy crisis, was headed by the Federal Finance Minister Dr Hafeez Shaikh. In short, there is a need for the ministries of Water and Power, Finance and Petroleum and Natural Resources to jointly come up with a strategy to resolve the crisis once and for all and the starting point has to be the elimination of the circular-debt. Be that as it may, poor governance within Wapda as well as in KESC and Pepco has been identified through various studies. Thus giving walking papers to Pepco MD, especially given that Pepco was earmarked for disbanding, makes good sense. Similarly, placing the Secretary Water and Power and Chairman Wapda on a two-week notice, would reinforce the need to produce results for all bureaucrats, a positive message. Still the solution lies in decisions that go beyond the Water and Power Ministry.