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The solution is deregulation

Privatisation and hydel power” — Dr Salman Shah, economist and former finance minister

The News on Sunday: What, in your view, are the reasons for the country’s energy crisis? Why have the governments failed to add to power generation?

Dr Salman Shah: The crisis has deepened over the last four years. Basically, Pakistan does not lack power generation capacity as the installed capacity in the country exceeds 23,000MW. The average generation at any given time does not exceed 14,000MW. The remaining capacity is unutilised due to a number of reasons: a)1,500 to 2,000MW is unutilised due to the non-availability of imported fuel based on oil. This is due to the circular debt problem; b)poor maintenance and lack of spare parts and down time contributes another 1,500MW; c)low level of water in the dams reduces hydel power availability by 2,000MW in the lean period; and, d)insufficient plants are too expensive to run.

Having said that, the real issue is not availability of capacity but the affordability of power based on imported fuels. The imported energy costs around Rs15 to Rs20 per KWh whereas the hydel power from dams can cost less than Rs2 per KWh. Indigenous coal if available would cost Rs10 per KWh. The choice is clear but due to poor leadership Pakistan is being deprived of cheap clean energy from hydel.

TNS: How do you see the present system of power generation, distribution and shutdown?

SS: Well, the present system is dominated by the Ministry of Water and Power, Wapda and Pepco. This public-sector-dominated system has failed to deliver. Power sector reforms based on deregulation and privatisation have to be introduced if Pakistan wants to attract investment and modernization of the sector. This reform is very doable. Many countries have done it and time is ripe to do it in Pakistan. Without deregulation and privatization Pakistan will not be able to get an efficient, competitive and affordable power system. The perception of unjustified distribution amongst the provinces will continue due to excessive role of the government in production, transmission and distribution of power. The current stage of reform in power sector is similar to the reform stage of the telecom sector 25 years ago only deregulation, privatization and large scale induction in the telecom sector resulted in the current competitive and cheap telephony services similar reforms in the power sector are needed for competitive efficient and cheap power availability in Pakistan. The reform programme has been derailed since last four years.

TNS: How do you evaluate Punjab’s allegations of unequal power distribution? SS: As already stated, as long as the sector is dominated by government these allegations would continue to be there.

TNS: After the 18th Amendment, the provinces are free to generate power sources. Do you think they are able to do this in terms of the main challenges of capacity building, attracting investment, having right planning and policy making and engaging professionals?

SS: Pakistan needs to go much further and facilitate the role of the private sector to make any difference in the power shortages, line losses and nonpayment of bills. The provincial governments have no capacity to step in the power sector to alleviate the problems.

TNS: Why has Pakistan failed to pay attention to hydel power generation?

SS: Pakistan has the potential to produce 100,000MW of cheap (Rs2/unit) hydel power and also earns carbon credits, whereas it has only created 6,500MW of hydel facilities. This can be termed criminal neglect and the blame has to be laid on the PPP and the ANP. These parties can help the leadership to make a breakthrough that this country needs in this matter of life and death of the masses.

TNS: Are we heading towards a solution?

SS: Unfortunately, we are going in circles and not resolving the issues. The solution is deregulation, privatisation and focus on hydel power.

TNS: What are the key short-term and long-term actions which are required to meet the challenge?

SS: Immediate reforms as suggested above. Furthermore, introduction of a power market, opening up of transmission facilities to all producers, controlling the losses and theft is very important. Receivables from the public sector and resuming the stalled privatisation programme are others factor that can help.

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