Electricity governance issues can be fixed in a fortnight: Abid Qaiyum Suleri

A policy analyst and development practitioner, Dr Abid Qaiyum Suleri has been serving as executive director of leading Pakistani think-tank "Sustainable Development Policy Institute" since 2007. Besides some policymaking at home, Dr Suleri has also served on various policy formulating bodies in South Asia. He is a PhD in food security from University of Greenwich, UK (2001).
These are extracts from BR Research's recent interaction with Dr Suleri in Islamabad: BR Research: How do you view the government's initial efforts at resolving energy sector woes? Abid Qaiyum Suleri: It is understandable that power generation cannot be increased overnight, but some immediate measure can be taken and some of them are reflected in draft power policy. However, in order to implement any policy, there are certain prerequisites, for instance, competent and apolitical people should be appointed in Nepra and Ogra to transform them into true independent regulatory authorities. Moreover, efficiency-based resource allocations can be done in the energy sector by providing more furnace oil or gas to those power plants that have higher efficiency. That may not be easy, but the government would have to carry out a "heat rate" audit of Independent Power Producers (IPPs) (which have an installed capacity of 8,657MW) and try to divert the fuel to the more efficient IPPs.
But inefficiency is just one of the many problems in the Gencos (government-owned power-generation companies) which have an installed capacity of 4,720MW. The furnace oil that Gencos receive from PSO contains water content as high as eight percent, compared to the permissible water content of 0.5 percent. Due to inefficiencies and pilferages, Gencos eventually produce just one-third of the energy they can produce with the same amount of fuel. There is pilferage on the way, with connivance of officials. This, in our estimates, translates into a whopping loss of about Rs 40 billion per annum. Genco's should refuse such high water-content furnace oil, but they don't. This is a governance issue which needs to be looked into.
Another governance failure rests with the distribution companies (Discos). Some XENs in large cities are involved in 'selling' loadshedding hours, which means they would take bribes to allow a certain area or locality to receive more electricity than the others. The electricity that NTDC allocates to a particular Disco is supposed to be evenly distributed across rural and urban areas.
However, a rural area or a suburb may face the brunt of loadshedding because some industrialist might approach the conniving Disco staff and pay them off to avoid long loadshedding for his factory production. It is true that current power crisis may not be resolved in next 3-4 years; however, abovementioned governance issues may be fixed in a fortnight by adhering to principles of transparency and accountability. BRR: If improvement in power generation is a long drawn-out process, can the situation be improved earlier on the distribution side?
AQS: Discos must allocate loadshedding hours in areas with respect to their distribution losses. They should make the relevant, local level officials responsible for theft- and recovery-related issues. Moreover, Discos should provide maximum electricity from where there is maximum bills recovery - this has already been done by KESC in Karachi. The government should also think about allowing Discos to purchase power from any source they like, because doing that will break the monopoly of Gencos and IPPs. In addition, we are recommending that the government provide pre-paid meters to areas where bill default is high.
What we at the SDPI are suggesting is that efficiency and governance in the power sector be devolved to the local level. We are also recommending that federal government allow a province, where a Genco is located, to directly open the LC for import of furnace oil. But decentralisation demands accountability, so the provinces should also be made accountable in such a scenario.
BRR: What specifically is SDPI currently working on regarding energy sector?
AQS: We are working mostly on energy governance. Our position is that complete removal of subsidies will mean lifeline users will be worse off. Already, Pakistani consumer is paying an average tariff higher than the consumer in India, Bangladesh and the United States. Pakistan's average applied consumer tariff is Rs 12 per unit, compared to Rs 7.36 in India, Rs 5.47 in Bangladesh and Rs 8.59 in the US. Further raising the tariffs for the industrial sector, which is paying tariffs that are among the highest in the world, is not the solution.
We believe that there should be a review of the policy for tariff rationalisation. Tariff rationalisation, especially for industrial sector, would reduce the incidence of power theft. We need to learn from our region. For instance, in India, electricity is priced cheaper for their agricultural users compared to other user categories. Similarly, industrial users in Bangladesh get cheaper electricity compared to residential users.
We are also currently studying the efficiency level of UPS devices, to find out the amount of electricity they return compared to what they absorbs. In an economic sense, we want to know how much unproductive energy is being taken up by these devices from the overall energy balance sheet.
We have a new report coming up on shale gas prospects in Pakistan. Pakistan possesses shale gas reserves which are many times more than the natural gas reserves. This new resource is a combined resource of India and Pakistan as it is located on the border, underneath successive layers of clay. Our report will argue for exploring the feasibility of how to bring shale gas in our energy grid.
BRR: We have been hearing about shale gas for many years, yet there are no developments so far. Why is that so?
AQS: Firstly, the influence of oil lobby is a big hurdle. Secondly, Pakistan does not have the requisite technology and capacity to undertake this complex project. Thirdly, foreign investment scenario is bleak. Fourthly, since most of shale reserves are on the border, whichever of the two countries starts digging the ground first, the other will raise hue and cry, similar to what we have seen on cross-border dam constructions. Lastly, policy-level thinking, unfortunately, is that the possibility of shale gas is hypothetical.
BRR: Coming to food security, what is the current situation in Pakistan?
AQS: SDPI is soon publishing its 2013 Food Security Report. We have found that while food availability from major crops has remained at the same level over previous year, its accessibility has decreased. At the provincial level, efforts are geared towards enhancing production, which is important. However, failure to link production with accessibility remains a lingering issue, which leads to more food insecurity. Unfortunately, the previous PPP government did not own the Zero Hunger Programme that they themselves launched. Hopefully, this government will prioritise this issue along with other pressing ones.
It must be understood that food insecurity is not about the percentage of people who are sleeping hungry, due to the state's social safety nets, philanthropic initiatives and other strong community linkages, the extent of hunger gets slightly reduced. It is the people in the lower middle class that are at the top rung of food insecurity. These people cannot access the social safety nets (like BISP) because they are not 'poor' in the strict sense. They also do not want to access such safety nets due to social stigma. What happens is they start compromising on their basic food requirements.
Dipping a loaf of bread in tea and eating it might satisfy hunger but it doesn't provide balanced nutritious diet. That is especially severe for kids up to five years of age whose IQ and physical development are irreversibly affected due to malnutrition.
BRR: How alarming has the Water Security issue become?
AQS: When I advocate building dams and water reservoirs (which is politically sensitive nowadays), I am talking from the water security perspective. Pakistan's current per capita water availability is already low, about 1,000 cubic feet. We are at the threshold of being water scarce nation. Pakistan's population is going to double in next 30 years, which means per capita ratio would become at least half keeping the water supply at same levels (which is unlikely).
If no action is taken, water insecurity will grow over the years, and over time, water outages will become harder to withstand, because unlike gas or electricity, water cannot be imported. The crisis will be different, and severe, compared to the ongoing energy crisis, for water is life.
We receive about 75 percent of annual precipitation in three months' time. Due to lack of water reservoirs, much of this rain water remains unutilised. Building dams is essential for storing this water for household water supply, irrigation purposes, and for energy generation, too. Starting point for the government would be to devise a policy to at least maintain the per capita water availability based on projections of population growth and water supply.