Power projects: ADB raises transparency questions

Asian Development Bank (ADB) has reportedly raised questions of transparency in execution of power projects funded by it and indicated further investment of $ 2 billion in the energy sector during the coming three years.

This was officially confirmed by the Power Division after a meeting between Minister for Petroleum and Power, Omar Ayub Khan, Prime Minister Special Assistant on Energy Nadeem Babar and an ADB team headed by Director General for Central and West Asia Department, Werner Liepach on Wednesday. ADB's Country Director Xiaohong Yang was also present at the meeting. "Discussed energy sector reforms with DG Werner Liepach. ADB is top energy partner with $ 1.2 billion portfolio and plans $ 2 billion investment in the next three years. Thanked ADB for $ 300 million this week for sector reforms including addressing circular debt," said Khan in a tweet.

According to an official statement, the meeting took stock of ADB-funded projects in the energy sector and it was decided that a comprehensive portfolio review meeting will be held by the end of this month between Power Division and ADB to steer the projects to their logical culmination. It was also agreed that all efforts by both sides will be made to ensure maximum transparency during the execution of projects.

During the meeting, ADB showed interest in facilitating technical studies for the gas storage facility in Pakistan. "During later part the ADB can also consider financing the project," observed Director General, Werner Liepach.

The ADB team was apprised of approval of new Renewable Energy Policy which will be placed before Council of Common Interest (CCI) in its scheduled meeting by the end of this month. The team was briefed regarding various steps taken by the Power Division to boost the efficiency of the system and campaign against power theft.

ADB was informed that circular debt capping plan is also being vigorously pursued and implemented by the Power Division resulting in considerable reduction in its growth from Rs 39 billion a month to Rs 12 billion per month.

On December 6, 2019, Werner Liepach observed that "the cash shortfall across the power supply chain in Pakistan, also known as circular debt, has shot up to more than $10 billion and is a long-standing chronic issue afflicting the country's power sector; a comprehensive and realistic circular debt reduction plan, assisted by ADB in close coordination with other development partners, is the cornerstone of this subprogram. The plan aims to drastically cut the new flows of circular debt and provides policy directions on addressing accumulated circular debt."

ADB also observed that while Pakistan has made significant efforts in recent years to expand its electricity generation capacity and stabilize supply, the country is yet to overcome the challenge of inefficiencies, distortions, and uneven reform progress in the sector. These inefficiencies were estimated to have cost the country's economy up to $18 billion, or 6.5% of gross domestic product, in 2015.