According to a Business Recorder exclusive, Secretary, Ministry of Water and Power, Younus Dagha, gave a detailed briefing to the cabinet committee on energy presided over by the Prime Minister recently. In his presentation, he identified a host of structural challenges that remain to be addressed, ranging from line losses inclusive of feeder-wise third-party losses, inaccurate billing issues, theft, as well as poor recoveries in Balochistan, Sindh and Azad Jammu & Kashmir.
Dagha also emphasised the below 70 percent accuracy of mobile meter readers. But perhaps the most disturbing aspect of the presentation was Dagha’s acknowledgement that governance as well as ‘unconcerned’ board of directors and privatisation posed additional challenges to the sector and these have not been addressed even after the completion of nearly half the tenure of the incumbent government.
The only silver lining, he added, was the dramatic decline in the international price of oil which was a boon to the government in not only keeping the rise in tariffs at a politically acceptable level but, through raising taxes on petroleum and products, to generate higher revenue for the exchequer.
The veracity of Dagha’s briefing was confirmed by the Auditor General of Pakistan’s report that identified 265 cases of mismanagement, embezzlement, irregular expenditure, recoveries and overpayment amounting to 1140 billion rupees for which distribution companies (Discos), generation companies and hydropower projects were held accountable.
The report also highlighted internal weaknesses in the system that led to a loss of 87l.4 billion rupees, weaknesses that one would have hoped the PML-N government would have dealt with by now. These are extremely gloomy statistics and reflect why the public remains un-enamoured of government efforts to reform the sector.
A recent Nepra report also highlighted unresolved issues in the energy sector and when asked, the International Monetary Fund (IMF) mission leader for Pakistan, under the 6.64 billion dollar Extended Fund Facility, stated that the Fund would query authorities on Nepra’s findings in the ninth mandated quarterly review scheduled for the end of this month.
The Sharif administration has focused primarily on privatisation as the remedy for all that ails the economy, including improving the privatised entity’s performance through enhanced efficiency considered the hallmark of private sector activity. Specific to the power sector, it means lower line losses and theft as well as generating higher revenue for the government to enable it to meet its ambitious and what many believe unrealistic revenue targets.
Dagha in his presentation also argued that privatisation of the four distribution companies scheduled for the end of the current year according to government commitment to the IMF would be a challenge in light of the K-Electric privatisation fiasco. It is argued that privatised K-Electric is receiving large annual subsidies under tariff differential thereby defeating the very purpose of privatisation.
K-Electric also used its considerable influence during the tenure of the PPP-led coalition government to access 650MW from the national grid thereby not producing at capacity. This charge though, is equally relevant to other generating companies partly due to inefficiencies and partly due to the inability of the transmission system to transport more than 1650MW.
To date, the Sharif administration has focused on enhancing generation through setting up new hydel, coal, wind, solar and imported LNG-based electricity power houses while the Zardari-led government supported renting power plants to meet the shortfall.
It is unfortunate that neither administration did any technical homework and/or ignored existing research on the power sector which is no doubt gathering dust in the Ministry of Water and Power. And while the Zardari-led government at least acceded to the demand of its then technocrat finance minister, Shaukat Tarin, and held a third-party audit on rental power plants through Asian Development Bank (ADB), the Sharif administration remains averse to any such audit and in addition is refusing to share information even on its commercial RLNG deal with Qatar.
Transparency, accountability and last but not least, massive structural reforms to eliminate internal weaknesses in the power sector are required if performance is to improve. Dagha did not mince words during the presentation and one can only hope that the government begins to proactively deal with his list of structural issues.
Source: Business Recorder