EDITORIAL: The government can bend over backwards if it likes, and a number of dispensations have tried to do exactly that in the past, but none of the problems related to Independent Power Producers (IPPs), especially the always rising circular debt, is going to go away till it orders a forensic audit of the entire supply chain of the power sector; beginning with the IPPs themselves, of course. In fact if it had done this before signing agreements with them a few months earlier, it would most likely not be in the awkward position that their refusal to accept Rs400 billion over three years has put it in. It is a little surprising, actually, that nobody in the prime minister’s rather large energy team saw this coming, especially since they had just promised to make a one-time full payment. Now everybody has to listen to their typical excuses all over again, especially that the only reason that they could sell the deal to their respective boards was the lump sum payment guarantee. And now that the government of Pakistan is suddenly going back on its word, according to them, they would have to take the matter back to their boards as well as their shareholders, etc. Needless to say, of course, that all the time the circular debt keeps multiplying and the IPPs continue to make outrageous profits.
These are not just delaying tactics but also amount to blackmailing the government by waving past sovereign guarantees in its face especially when the country is deep in very troubled negotiations with the International Monetary Fund (IMF), of which energy sector reforms are a very crucial part, and the sector is simply collapsing under the burden of unsustainable debt. That is why this newspaper has always called for an immediate and complete forensic audit of all IPPs. The unimaginable figures that make up the circular debt are, in fact, completely fictitious and have only served to fatten IPP executives and of course the usual bunch of politicians that helped them seal such lucrative deals. With time, seeing how things have just spiraled out of control, numerous industry stakeholders have started calling for the audit as well, some going to the extent of advocating complete suspension of all payments or talks till it is carried out and their books are opened.
The matter of fabricated figures needs to be investigated very seriously and urgently. The National Electric Power Regulatory Authority (Nepra) had to put off a hearing on Tuesday, requested by distribution companies to discuss a tariff increases of Re0.86 per unit, because the whole thing turned out to be an outrage since representatives of power companies came completely unprepared and their arguments were all over the place. Surely, the government remembers that the outcome of such, and other, important meetings ultimately decides what ordinary people and businesses pay for their electricity needs. It is simply unacceptable that such unprofessional behaviour and practices can be allowed to influence one of the country’s most important issues.
If only the right steps had been taken at the right time, the circular debt would never have ballooned into trillions of rupees. Now, as things stand, IPPs have been able to engineer iron-clad official guarantees that legally protect their abnormal profits whether we buy from them or not. And the only thing the government can really do is go ahead with that forensic audit that everybody seems to appreciate the need of yet nobody seems willing to press the button, so to speak. Already needlessly expensive electricity has not just forced a lot of people into corruption and stealing it, but also practically priced our industry out of the region’s competitive market. The government cannot just sit and watch this problem grow like this. Pakistan Tehreek-e-Insaf (PTI) should not forget that it made a pretty big deal about the circular debt when it was in opposition. Now it has no option but to take this bull by the horns. And the longer it takes to work out just how it is going to do it, the harder it will become. IPPs have been eating off the fat of the land for far too long. Now they must answer for it.
Copyright Business Recorder, 2020
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