As Punjab experiences a severe power crisis, public anger boiled over onto the streets all across the province last Thursday. Angry protesters vented their anger not only at public property, burning everything in sight at the Pepco office in Multan; in the nearby Vehari they also attacked the offices of Nawaz and Q-League legislators, as well as a Tehrik-i-Insaaf office. Chief Minister Shahbaz Sharif came out to join a demonstration in Lahore and threaten that he would give a call for a long march on Islamabad, if the federal government did not stop "meting out stepmotherly treatment" to Punjab.
He, in fact, has been complaining of what he has found discriminatory treatment on earlier occasions, too, prompting the Prime Minister to chair a national energy conference in Lahore, where it was decided to distribute the shortages equally among the provinces. That has not happened for the simple reason that following the passage of the 18th Amendment, the provinces have the first right to benefit from the resources based within their respective domains. Punjab, though, has been arguing that since the federal government controls the distribution network using the principle that the areas with the least amount of leakages would get rewarded accordingly. The four discos in Punjab: Lahore, Faisalabad, Multan and Rawalpindi have line losses that are below 15 percent while the line losses of Peshawar, Quetta, Hyderabad and Sukkur are in the range of 35 to 40 percent. As a consequence, the federal government should increase the supply for Punjab, where the rate of loss on account of leakages and thefts is the lowest, argued the CM Punjab. There is little chance, though, of resolution of the crisis on the basis of pronouncements made at the energy conference. The Minister of Water and Power Naveed Qamar blames the Punjab government for ignoring the conference's recommendations, as part of a power conservation plan, of two weekly holidays and early closure of businesses. Qamar argues increasing the output and equal reduction in energy usage, together, will reduce loadshedding in the country.
Taking notice of the violent and widespread protests in Punjab, this time President Zardari, two days in a row, chaired a high level emergency meeting where it was decided to activate the independent power producers' installed capacity, idled by a high circular debt. Toward that end, the government is to release immediately Rs 70 billion to power companies and fuel suppliers, and raise another Rs 82 billion by floating government bonds in the form of Term Finance Certificates (TFCs). Recently, Prime Ministerial intervention at least twice, came up with a similar solution. In both cases, it amounts to refinancing the stock of circular debt with no success in stopping the haemorrhage, which continues despite a 130 percent rise in tariff. The Federal Government is still subsidising the electric supply to the tune of Rs 3.50 per unit, although the overall cost of generation is about Rs 11 per unit. The Federal government needs to take a tough line with the defaulting consumers, including the Federal and provincial government departments and agencies. As a press report points out, a significant cause of the piling up circular debt is some Rs 32 billion owed by different influential consumers to Wapda.
Then there is the Rs 25 billion loss caused by free supply to Wapda employees, Rs 26 billion spent on subsidies for tubewells in Balochistan, and another Rs 11 billion that go into free power supply to Fata. Add to these, the uncalculated loss from power theft and line losses, which in parts of Sindh run as high as 40 percent, and it becomes plain that characteristic governmental inefficiency and political considerations have exacerbated the power crisis. The scheme it announced to pay part of the circular debt, though much welcome as a temporary respite from gruelling loadshedding, is unlikely to last long. Provincial governments need to share the load of clearing the circular debt in 'one-go', with the federal government as per division of the resource formula provided in the 7th National Finance Commission Award.
It is time for a change in the present model of administering the power sector. It is instructive to recall in the context the example of telephony. Before the privatisation of the sector, getting a telephone connection was a truly arduous task, which could take even a couple of decades to come to fruition. Once the single buyer model in the field was broken the scenario changed. Similar model needs to be adopted in the power sector by allowing wheeling charges for transmission and distribution on the system, only then private sector investment will be forthcoming, ushering in a healthy competition. Consumers could be the ultimate beneficiary. This model needs to be applied to the power sector to grow freely with the government getting out of T&D restricting its role in hydel and coal generation. And, allowing Nepra to play the role of a truly independent regulator. That is the only way to overcome rank inefficiency and wastage and also to increase production through the development of alternative sources of power generation in the long-term.