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FDI in energy sector declined by 87pc in 2012

Foreign direct investment in the country’s power sector declined by 87.1 percent to $708 million in 2012 from $5.475 billion in 2008 mainly due to ballooning circular debt and bureaucratic and political extortion.

Industry sources said that the existing players were reducing their exposure rather than investing in the sector. Alongside many others, the energy crisis is the darkest spot as far as the performance of the former Pakistan Peoples’ Party (PPP)-led coalition government is concerned.

The total installed generation capacity of the sector increased by a mere 16 percent from 20,232 MW in 2008 to 23,538 MW in 2012, while electricity shortfall increased by 242 percent from 1,850 MW in 2008 to 6,325 MW in 2012, data compiled by the Water and Power Development Authority (Wapda) suggests.

The increase in the installed capacity during the period is because of 28.2 percent rise in expensive thermal generation, whereas generation from hydel sources declined by 0.1 percent.

According to the data, the power sector subsidy, which was Rs112 billion in 2008, surged to Rs554 billion in 2012.The government payables to the power sector, accounting for over 50 percent of circular debt, increased by a mammoth 488 percent to Rs500 billion in 2012 as against Rs85 billion in 2008.

Though the average consumption per connection declined by 14.6 percent to 2,984 kwh in the last five years, the distribution and recovery losses of distribution companies increased by 73.8 percent.

According to industry sources, despite the involvement of USAID Power Distribution System announced in 2009 to increase the capability of power managers and guide the power distribution companies to decrease the line losses and improve revenue collection, the government proved its inability to manage as the government-owned power distribution companies put up a dismal performance, increasing the losses from Rs119 billion in 2008 to Rs207 billion in 2012.

USAID Power Distribution System was announced by former US Secretary of State Hillary Clinton in 2009 as being among the US’ efforts to support the government of Pakistan in reforming the power sector.

It should have helped distribution companies to improve their commercial performance in terms of reducing losses, increasing revenues and improving customer services through the introduction of new technology and improved work practices for which it was mandated.

However, no serious efforts with sincerity were made by the former government to improve the power sector’s situation.

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