The international financial institutions (IFIs) have linked their loan programme for Pakistan''s power sector with improvement of governance under ''Vision 20-20'' programme, which requires $17.7bn through private sector.
The overall investment costs, including interest, to materialize Vision 20-20 programme is about $44 billion over the ten-year period. Documents showed that the public sector would contribute $26.2 billion for laying hydel, Thar coal and transmission and distribution (T&D) infrastructure, and private sector would provide funds amounting to $17.7 billion under 20-20 Vision.
Power sector is bleeding with issue of governance which is resulting in 10-40 percent transmission and distribution losses. "IFI''s are committed to fund the investment requirements if the sector governance is corrected," Pakistan officials informed USAID in a meeting held on December 15, 2010.
The United States is implementing its energy programme through USAID to overcome energy crisis in Pakistan. Under Power Sector Reforms, USAID is working in close collaboration with the Planning Commission and the Ministry of Water and Power to improve efficiency of power distribution companies (discos). The Deputy Chairman of Planning Commission, Dr Nadeemul Haq, is playing a key role in implementing power sector reform programme.
There has been little investment in the last decade in power sector, especially in power generation, resulting in a significant investment deficit. The Vision 20-20 programme is aimed at overcoming investment deficit with objective to enhance power generation to tackle energy crisis, which is looming large in the country.
USAID was informed that "it is not possible for the government to increase power tariff perpetually because it would erode both affordability by population and competitiveness by industry and business". To reverse the trend of increasing power tariff, the first option is to improve efficiency in power system in the short term.
Pakistan''s officials said that for lasting benefits, substantial reduction in cost of power generation was required which could only be achieved by diverting from oil-based power generation to gas-based generation in the short term to medium term and to local hydel based power generation in the medium to long term.
At present, Pakistan''s power sector is losing 250 billion rupees a year due to higher transmission losses that threaten the economy and the budget. Power sector reforms, being major theme of government policy, are critical for the survival of the country. These reforms will consist of developing a power market, better regulation, improved governance and upgradation of technology and the machinery of the power sector.