The government has placed Pakistan's prime autonomous regulators under the dictate of the ministries, as a line function authority, overriding opposition from the governments of Sindh and Khyber Pakhtunkhwa. When a ministry controls a regulatory authority, Sindh Chief Minister Syed Murad Ali Shah argued, how can it remain independent in regulating the authority's functions? Pervez Khattak, the chief minister of Khyber Pakhtunkhwa, raised similar concerns.
Finance Minister Ishaq Dar is reported to have said that the ministries have been delegated powers to look after the administrative matters of respective regulatory bodies, and no law had been changed in this regard. Both the federal Ministry of Petroleum and Water and Power have welcomed the change.
The fact remains what better administration these ministries could provide to the regulators placed under them when they themselves are infected with poor governance. The move adversely changes the very reason these regulators were established.
Nepra and Ogra were established in the 1990s when the governments decided to open the energy sector to private investment, leading subsequently to a de-regulated market driven by market dynamics and hence the need of autonomous regulators to balance the interests of the government, the consumers and the private investors.
Nepra was established in 1997 through an act of Parliament. Some of the extracts from the notification issued are italicised as follows, for an understanding of the legality and operational aspects of this entity. Similar pattern holds true for Ogra.
1. Short title, extent and commencement. (1) This Act may be called the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997.
(2) it extends to the whole of Pakistan
[It shall apply to the Federally Administered Tribal Areas.]
1 [It shall apply to the Provincially Administered Tribal Areas of the North-West Frontier Province, except the Tribal Area adjoining Mansehra district and the former State of Amb.]2.
3. Establishment of the Authority. (1) As soon as may be, but not later than thirty days after the commencement of this Act, the Federal Government shall, by notification in the official Gazette, establish a National Electric Power Regulatory Authority consisting of a Chairman to be appointed by the Federal Government and four members, to be appointed by the Federal Government after considering the recommendations of the respective Provincial Governments.
(2) members for a
(i) (ii) (iii) (iv)
There shall be a Vice-Chairman of the Authority, appointed from amongst the period of one year, by rotation, in the following order, namely: the member representing the Province of Baluchistan; the member representing the Province of North-West Frontier; the member representing the Province of the Punjab; and the member representing the Province of Sind.
(3) competence with at least twenty years of related experience in law, business, engineering, finance, accounting, economics, or the power industry.]4
[The Chairman shall be an eminent professional of known integrity and competence with at least twenty years of related experience in law, business, engineering, finance, accounting, economics, or the power industry.]4
(4) Every member shall be a professional of known integrity and competence with at least fifteen years of related experience in law, business, engineering, finance, accounting, economics or the power business.
(5) The Chairman and a member shall, unless he resigns or is removed from office earlier as hereinafter provided, hold office for a term of four years and shall be eligible for reappointment for a similar term: Provided that a Chairman or a member shall not be appointed under sub-section (1) if he has attained the age of sixty-five years.
(6) No act or proceeding of the Authority shall be invalid by reason only of the existence of a vacancy in, or defect in, the constitution of the Authority.
(7) The principal office of the Authority shall be in Islamabad and it may set up offices at such place or places as it may deem appropriate.
4. Resignation and removal of Chairman, etc (1) The Chairman, or a member may, by writing under his hand, resign from his office.
(2) The Chairman or a member may be removed by the Federal Government from his office if, on an inquiry by the Federal Public Service Commission of performing the functions of his office by reason of mental or physical incapacity or has been found guilty of misconduct.
7 Powers and functions of the Authority. (1) The Authority shall be exclusively responsible for regulating the provision of electric power services.
(2) In particular and without prejudice to the generality of the foregoing power, only the Authority, subject to the provisions in sub-section (4), shall -
(a) grant licences for generation, transmission and distribution of electric power;
(b) prescribe procedures and standards for investment programmes by generation, transmission and distribution companies;
(c) prescribe and enforce performance standards for generation, transmission and distribution companies;
(d) establish a uniform system of accounts by generation. transmission and distribution companies;
(e) prescribe fees including fees for grant of licences and renewal thereof;
(f) prescribe fines for contravention of the provisions of this Act; 6
(g) [review its orders, decision or determinations] 7
(h) [settle disputes between the licensees;
(i) issue guidelines and standard operating procedures; and
(j) perform any other function which is incidental or consequential to any of the aforesaid functions.] 8
a) determine tariff, rates, charges and other terms and conditions for supply of electric power services by the generation, transmission and distribution companies and recommend to the Federal Government for notification;
(b) review organisational affairs of generation, transmission and distribution companies to avoid any adverse effect on the operation of electric power services and for continuous and efficient supply of such services;
(c) encourage uniform industry standards and code of conduct for generation, transmission and distribution companies;
(d) tender advice to public sector projects;
(e) submit reports to the Federal Government in respect of activities of generation, transmission and distribution companies; and
(f) perform any other function which is incidental or consequential to any of the aforesaid functions.
With Nepra under the Ministry of Water and Power, it is not expected to remain faithful to the basis and purpose of its establishment. It will be more subservient to the dictates of the government than ever before and will lose its independence of judgement of whatever little is left out.
It has come to light that Nepra, Ogra and PPRA were, to a limited extent, challenging the government on tariffs, rate of returns to investors, securities, purchase and transparency.
The government considered even this little challenge as an irritant and a bottleneck. With elections due in 2018 the government wants the projects in hand to be completed in time, especially that related to the energy sector.
The second reason appears to be a strong pressure from CPEC stakeholders. Soon after the handing over of the administrative control of Nepra to the Ministry of Water and Power, it is reported that the Economic Co-ordination Committee (ECC) of the cabinet has directed the regulators to allow 17 percent IRR of withholding tax on dividend as a pass through item to a Chinese company in the transmission tariff as per actual payment. Basically, such determinations is the job of the regulators. The government's endeavour to move on fast with the projects is understandable. The government's target to complete it within its tenure is also understandable as it has invested its time and energy into it and well deserves to harvest its gains. Both are in public interest.
But to do this recklessly and by sacrificing the state institutions is a mistake and not in the national interests. Its fallout will overwhelm the short-term gains. State institutions are already crumbling. The demise of the regulators is a strong blow.
(The writer is the former President-Overseas Investors Chamber of Commerce and Industry)
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