Since the unbundling of WAPDA, the National Transmission and Dispatch Company (NTDC) has been one of the few power entities in Pakistan not consistently posting financial losses. Yet, in recent months, the Ministry of Energy has targeted NTDC with intense criticism, blaming it as the main source of issues plaguing the power sector.
Critics say the ministry’s focus on NTDC ignores key factors contributing to rising electricity prices, such as the rupee’s steep devaluation and the 90% capacity payments owed to independent power producers (IPPs) contracted by the Private Power and Infrastructure Board (PPIB) and Central Power Purchasing Agency (CPPA-G). Moreover, all commercial losses are attributed to distribution companies (DISCOs), not NTDC.
Despite these factors, delays in NTDC’s transmission expansion projects are being branded as the “mother of all evils” causing high electricity prices.
Delays in infrastructure projects are hardly unique to NTDC; cost overruns and project delays affect numerous sectors in Pakistan, including roads, bridges, and dams. The narrative linking these transmission delays to consumer electricity bills also warrants scrutiny.
Over the past three years, the National Electric Power Regulatory Authority (NEPRA) has withheld any added costs related to so-called “system constraints” from NTDC’s revenue in fuel cost adjustments (FCA). NEPRA calculated these costs at approximately Rs 42 billion over three years—a small fraction compared to Pakistan’s total circular debt of Rs 2.6 trillion.
Amid these issues, the Power Minister’s proposed solution to expedite transmission projects involves trifurcating NTDC and creating a new company, EIMDC, responsible for developing various power infrastructure projects, including transmission and distribution lines for DISCOs, power plants, and more.
However, NTDC officials cite delays due to a lack of funds, prolonged land acquisition processes, right-of-way issues, and complex dealings with multiple lender agencies, including the World Bank, Asian Development Bank, and JICA.
Whether the new EIMDC will be able to navigate these same challenges effectively remains unclear. Industry experts question how EIMDC will manage land acquisition hurdles, vacate stay orders on right-of-way, or circumvent the approval processes of international funding agencies.
Notably, the trifurcation proposal also raises regulatory and legal uncertainties. The NEPRA Act of 1997 doesn’t recognize infrastructure construction companies, making EIMDC’s regulatory oversight by NEPRA ambiguous. Who will secure funding for these projects, and who will ultimately be responsible for debt repayment?
Another layer of complexity is NTDC’s current project structure: NTDC doesn’t execute construction projects directly but contracts them to private firms. Different NTDC offices handle aspects like project design, monitoring, and delivery. Transferring 50-60 employees to a new company without addressing fundamental inefficiencies might not yield the transformation the Ministry envisions.
This new focus on NTDC is also drawing attention for its timing. Until recently, the Ministry prioritized privatizing loss-making DISCOs and GENCOs. But the narrative shifted after NTDC presented a Transmission Investment Plan valued at over Rs 352 billion. Some industry insiders question if the profitability of this infrastructure business may have influenced the Ministry’s newfound emphasis on “fixing” NTDC.
These questions - and the broader consequences of trifurcation - may only be answered with time. Decades from now, one hopes historians won’t look back on NTDC’s restructuring with the same regret that experts today express over the hurried unbundling of WAPDA.
Copyright Business Recorder, 2024
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