Prime Minister Raja Pervez Ashraf stated that since March 2008, when the PPP government took over the rein, it has provided 1.2 trillion rupees as subsidy to the power sector, added 3500 MW to the national grid and initiated short-, medium- and long-term plans to resolve the energy crisis. The fact that four-and-a-half years later the country continues to experience socio-economically unsustainable loadshedding, well in excess of 16 hours in some rural areas, with major cities like Lahore subjected to an hour's loadshedding, followed by an hour of electricity supply, requires an assessment of his claims.
The obvious factor responsible for the continued energy supply crisis remains the intractable circular debt that the government has been unable to eliminate. The distribution companies have been unable to ensure 100 percent collection of electricity bills and the biggest offenders are not only the government ministries/departments, particularly the Federally Administered Tribal Areas, Khyber Pakhtunkhwa and Balochistan, but also the autonomous bodies.
In addition, those operating in the private sector also default on their bills and routinely use influence/coercion and/or outright intimidation against distribution companies' staff, who visit the site to disconnect their electricity supply for non-payment.
The case of Hina Rabbani Khar's spouse, who will repay billions of rupees of arrears on a ridiculously generous instalment plan is often cited to prove that influence continues to play a major role in the continued failure of the distribution companies to improve their collection targets. Recent data suggests that the collection of total bills is around 83 to 84 percent.
Failure of the distribution companies to collect 100 percent utility bills leads to their inability to clear their own bills to the generation companies who, as a consequence, cannot pay their fuel supplier Pakistan State Oil (PSO). This, in turn, disables PSO from paying for its imports.
The standard normal response of the government has been to release some money to PSO to enable it to purchase fuel, which then improves the energy supply situation in the country. Once the money so released dries up, the entire energy sector is gridlocked and begins to operate well below capacity. Thus, the 3500 MW addition to the national grid would be meaningless unless the government is able to deal with the circular debt.
The Prime Minister also revealed that the government has extended 1.2 trillion rupees worth of subsidies to the power sector. This amount was not used to eliminate the circular debt, or indeed was targeted towards the vulnerable, but was to remove the inter-disco tariff differential. In effect, the government through the subsidy, ensured that the poorly performing discos, notably those where collection of bills is poor and where transmission leakages are significant, were supported. Granted that a political government is unable to end such subsidies, yet it is significant that in four-and-a-half years, the government has made little, if any, effort towards formulating a plan to reward the better performing discos over the persistently poorly performing ones. Needless to add, the multilaterals including the International Monetary Fund are urging the government to end this subsidy so as to release funding for other social and infrastructure projects.
Raja Pervez Ashraf also pointed out that the government has prepared short-, medium- and long-term plans. The short-term plans, the rental power projects, were not only controversial from day one, mainly because the terms were altered to benefit those who had already won the bids but have also been declared null and void by the court. Long-term plans, notably mega dams like the Diamer Bhasha dam, are now hostage to inadequate funding - both from the government and the international community. In short, there is an urgency to implement power sector reforms that have been identified time and again in various studies undertaken not only with multilateral support, but also independently by the Ministry of Water and Power.
The studies urge the government to ensure that bill collections are 100 percent and the government either disconnects those who do not clear their arrears or cut the amount of their arrears at source. The private sector must also clear arrears or else face disconnection. In addition, the long-term plan of the government must focus on changing the energy mix and reducing reliance on the expensive furnace oil. Transmission losses must be reduced and the circular debt must then be slowly eliminated as only then would it not creep back up, as has happened during the past four-and-half years.