Growing power sector challenge


WEB DESK: A lack of delivery of affordable electricity to consumers (uninterrupted) continues to be our Achilles’ heel in 2016. Prime Minister Nawaz Sharif is personally handling the crises. But circular debt remains a lingering issue and despite best efforts to bridge the demand and supply gap in electric power, resulting in improvement, albeit modest, in load shedding, both our businesses and households continue to suffer and our growth remains quite anaemic.

And, the Finance Ministry continues to complain about the pressure on its fiscal position and Ministry of Water & Power also continues to complain about non-payment of dues from the finance ministry, even of the budgeted amount which rightly belongs to it. Now power ministry has urged the provincial and federal governments to pay Rs 181 billion for achieving sustainability in power sector, says a report in this newspaper.

PM Sharif needs to ascertain where the fault lies. The BR report says that Rs 41 billion is owed by the federal government and the rest by the provincial authorities with Sindh having the largest outstanding of Rs 74.110 billon. The question, therefore, is: why can’t the issue be resolved at the forum of Council of Common Interest (CCI)?

Sindh has all along complained about overcharging and wrong billing. This complaint was there, even when the same political party (PPP) was in power, at the centre and in Sindh. Reconciliation of bills is not an unsurmountable problem. A third-party audit of the bills can be one of the acceptable proposition for reconciliation of past dues. For the future, installation of smart meters which are digitised and computerised could overcome this problem and the methodology to reduce line losses cannot be parked into provincial billings. Payment of 25 percent agreed at CCI is inadequate. Companies do not run into difficulties because of losses.

It is cash flow which impacts their working more. The inability of Discos to collect their bills from officialdom is creating the circular debt. And, what is officialdom? They are government managed and operated institutions (companies) which cannot pay the utilities. These companies either are overloaded with manpower or their rates for services rendered are fixed (not by them) but the Ministries which manage them.

Then what could be the most plausible answer? The government should not be in business; its role in business, if any is as a regulator. But the question is why can’t offload these loss-making entities? The staff and workers do not let restructuring of these entities and the Parliament does not want to privatise them because there exists a growing mistrust among political parties. The answer lies in creating a platform to do so, ie, privatise some of the major loss-making entities in a transparent manner. Governmental responsibility towards owning infrastructure companies such as those in the realm of water, health and education should remain. Private sector can only complement government-managed institutions in these vital social sector fields.

Prime responsibility for law and order, infrastructure building, health and education would remain with the government. Public sector if operated like a business can also be efficient. Countries such as: Singapore have shown the way. Placing and attracting best talent, by paying above market-based salaries and forming Board of Directors comprising eminent persons, which act as a shield, from political interference and same time formulate policies and give directions with a view to balancing the interest of consumers as well as shareholders – instead of promoting nepotism and cronyism – is indeed possible.

Perhaps, Prime Minister Nawaz Sharif would show the guts as he did in the case of import of Liquefied Natural Gas (LNG). Pakistan is an energy-starved country. Local output has to be complemented with imports to bridge the supply-demand gap. A transmission line from Iran and importing 5,000MW of electricity would be easier and timely than ferrying coal from Karachi to Punjab. Hence the need for a serious look at the above proposal.

We also need to focus on whether we will have a consumer-led growth or instead opt for industrial-led growth. The government of General Pervez Musharraf/Shaukat Aziz opted for consumption-led growth and we all saw forex reserves dwindling to a precariously low position. We understand the political compulsion to provide electricity to domestic constituents. The question that requires an answer is: Is such a policy sustainable? Dr Mehboobul Haq in the 1980s came up with a village electrification programme. Now it is indeed possible to do so with alternate power from the sun. So let us opt for alternate sources – solar and wind – to provide electricity to houses and let the grid first supply to the industry.

After all, if PML (N) delivers services to the electorate they would also reward it. Growing mistrust between provinces also needs to be arrested. That will only happen if the federal government acts as a genuine neutral umpire. Unfortunately, however, it is not so at the moment.

Source: Business Recorder