WEB DESK: The present government is famous for favouring the process of privatisation, deregulation and liberalisation of the economy.
However, the recent statements of some of its ministers are not quite in synch with its pronounced policy position. Addressing the launch ceremony of Policy Research Institute of Market Economy’s (PRIME) 7th Tracking Report in Islamabad, Minister for Planning, Development and Reform, Ahsan Iqbal sought to justify the halt in privatisation of Discos, saying that investment in energy sector would be discouraged if government goes for privatisation at this stage.
“The privatisation of energy sector will stall investment on the distributional capacity enhancement because privatisation is a lengthy procedure taking as long as two years to be completed. The government is focusing on corporate governance after which Discos will be privatised which would fetch higher prices,” the Minister added. The country will produce more than 10,000MW of electricity by 2018 but the distribution system will not be supportive if the necessary investment was not made. Investment of $3 billion was made for modernisation of distributional capacity which was now limited to 16,000MW.
Contrary to the observations of Ahsan Iqbal, the report of PRIME on the subject was more point-blank. It said very clearly that the government had chosen not to follow the promised reforms, ie, privatisation, deregulation and liberalisation and adopted popular economic measures underpinned by “Development Politics” and populist economic strategies. The report provided examples of a stalled privatisation programme in the energy sector, wherein privatisation of Gencos and Discos had already been shelved though the government insists that the process had only been delayed.
It was also stated that the government had received a score of only 50 percent on the basis of its economic performance. Senator Leghari stressed the point that reform implementation could also be impeded by political considerations and electorate in Pakistan does not vote on economic grounds but focuses on political agendas. According to Ali Salman, ED of PRIME Institute, economic development had taken place but it was sub-par and no significant reforms had taken place. He noted that although circular debt had been controlled its elimination as per the PML (N)’s manifesto remains a distant dream. Government’s dependence on indirect and withholding taxes has also increased. Shumail Daud, representing the business community, spoke about taxation woes.
The statement by Ahsan Iqbal seeking to justify a halt in the privatisation of Discos is a clear recognition of the intentions of the government that it is backtracking on the privatisation process which was a key policy of the present government to dislodge the white elephant from the back of nation, improve public finances, enhance productivity of the economy and revive growth.
Unfortunate is, however, the fact that PML (N) was the most outspoken supporter of the privatisation process while other political parties like the PPP had dithered on the subject. The present government had reinstalled the privatisation programme in October, 2013 when the Cabinet Committee on Privatisation (CCoP) approved a list of 69 PSEs for privatisation. Subsequently, in June 2014, eight PSEs were added to the list for early implementation of the policy. Privatisation Commission initiated the necessary process for various PSEs in banking, oil and gas, insurance, aviation and power sectors.
The strategic sale of National Power Construction Corporation and capital market offerings for UBL, ABL, HBL and PPL were successfully completed and gross proceeds of Rs 173 billion, including an amount of $1.1 billion in foreign exchange, were raised from these five transactions. The explanation of Ahsan Iqbal that privatisation of Discos had been put on hold because privatisation at this stage would stall investment in the distributional capacity enhancement as privatisation was a lengthy process likely to take about two years was not very convincing.
The government could have also started the process of investment in distribution capacity simultaneously, ie, two years earlier so as to be able to integrate the whole arrangement and complete all the related operations at the same time. The reversal in policy does not seem to have resulted from the reason explained by the minister but is likely to be the upshot of stiff resistance from the trade unions and opposition parties. The government probably does not want to open another front when it is already under pressure from a number of other sources. However, we will urge upon the government to remain steadfast because privatisation is not only the cornerstone of its reform agenda but is an important policy tool for removing the artificial barriers, opening up economy to competition, expanding exports and generating growth.
Privatisation also helps economy move from inefficient state-owned enterprises to efficient private organisations with state of the art management systems and technologies. We know that the privatisation programme is contingent on the support of all the stakeholders, including various government agencies and its regulatory authorities, trade unions and most importantly the people of Pakistan. It is a sad spectacle when even necessary and productive policies of the government are resisted by vested interests and opposition parties for gaining political mileage. Such a negative attitude needs to be discarded for greater good of the people of the country. It is somewhat good to see that CCoP has now decided not to opt for strategic sale of Discos; instead their shares will be offered through IPOs on stock exchange.
This may not be an ideal solution but is better than the status quo. However, the final government decision is certain as yet because there could be many a slip between the cup and the lip. The remarks of the other participants at the forum can hardly be denied as they are based on solid experience and astute observation of prevailing ground realities.
Source: Business Recorder