Power sector: poor governance

The government of PML-N inherited poor power sector governance bequeathed to it by PPP government. Unbearable power cuts, rental plant scams, unaccountable line losses and rampant power theft, woeful performance of power generation and distribution companies in public sector, use of uneconomical fuel mix both by private and public sectors, unregulated conduct of Independent Power Producers (IPPs) and all of these ills ultimately transforming into 'circular debt'.
The PML-N government had announced in 2013 that power crises 'will become history', economical fuel mix would be introduced to make power affordable to public and industry, loss-making power utilities in the public sector would be privatized and the challenge of circular debt would be overcome once and for all.
The situation, as of June 2017, is that the power available to consumers through grid is nearly the same as it was in May 2013, resulting in load-shedding of 8 to 12 hours a day, although the installed capacity is said to have been increased by 5000MW. The so-called economical fuel mix chosen by the government, however, did not go well as many of the coal-based power plants were aborted once it was discovered that the core issue is the transportation of coal and the infrastructure required for it. The whole of 6000MW Gadani Power Park, based on coal, was aborted whereas the LNG-based power plants were scaled down. Moreover, the privatization of loss-making public sector entities was terminated by the government during the fourth year of its five-year tenure.
Not only has the present government failed to improve power situation, it has placed Nepra under Ministry of Water and Power, depriving the regulator of its independence. Circular debt has spilled over into the entire fuel supply chain for the first time in the history of Pakistan. Reports suggest that ports, refineries, railway bogies, tanker lorries and even storage tanks have all been choked.
It's a vicious circle: petroleum ministry and finance ministry 'point out' gross mismanagement in power ministry while power ministry blames finance ministry and power sector regulator.
The issue has been forwarded to Nepra as well. It is reported that power ministry has asked for Rs 36 billion on an emergency basis to clear this issue. Furthermore, the finance ministry isn't willing to release any funds in order to contain country's fiscal deficit.
People are already paying a surcharge on electricity bills for Neelum-Jhelum Project - a project that is strongly characterised by cost overruns.
The Nepra Act 1997 deals with the surcharges. It, for example, says: "The government may, in addition to the tariff determined by the Authority, impose a surcharge on such consumer categories as may be notified in the official gazette. Apart from it, surcharge can be imposed after getting determined under National Electricity Plan for other purposes that include for raising funds for future development plan in power sector, environmental protection, energy efficiency, demand management, managing climate and promoting the security of energy supply. Surcharges will also be imposed to give effect to any tariff rationalisation or subsidy management guidelines as may be issued by the federal government from time to time."
The act is largely misused to cover up system inefficiencies and management incompetence, the essence or legitimacy of the surcharge is premised on the objective of bringing around structural changes in the system for the benefit of consumers in terms of quality, quantity and affordability of electricity. In reality, none of these is happening in this particular case. More of it is to come.
It is feared that the Nandipur power project and Sahiwal coal-fired project will never become economically viable in the absence of an independent regulatory environment; and the regulators may not have allowed higher system losses in electricity and gas distribution to be passed on to consumers. Likewise, major energy projects would continue to face similar challenges.
Consumers would continue to suffer from the consequences of all these acts of omission and commission and chronic flaws in the shape of escalating power tariffs which are reported to have increased manifold in the last five years, making it the most expensive electricity in the region with little or no improvement in availability and quality.
(The writer is former President - Overseas Investors Chamber of Commerce and Industry)