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Will PML-N’s energy policy deliver?

Given the scale and complexity of the problem and the need for huge investment in generation, the targets of ending the growing electricity supply gap and changing energy mix to cut costs set in the new National Energy Policy 2013-18 appear too ‘ambitious’ to achieve.

“The government can considerably minimise the blackouts in the next four to five years if it succeeds in implementing what it says (in the energy policy). But it will not be possible to end supply gap or change the energy mix without massive investment in the power sector,” says energy expert and former chief executive officer of Hub Power Zafar Iqbal Sobani.

“We must invest $25-30 billion in coal-based and hydropower projects over the next five years to completely bridge the supply gap and produce affordable electricity,” he insists.

Sobani is not the only one who is sceptical of the government’s plans to bridge the supply gap and bring down the cost of generation, transmission and distribution in the next four to five years. “We need to add at least 16,500 megawatts — 3,500 megawatts each year — by 2018 to meet growing domestic, commercial and industrial demand for electricity in the country,” says a former managing director of Pakistan Electric Power Company on condition of anonymity.

The government plans to retrieve full cost of electricity from consumers through ‘rationalisation’ of the prices for different consumers, end power blackouts by 2017, change energy mix to decrease the share of furnace oil-based generation to cut its consumer price, sell the selected state-owned Gencos (generation companies) and Discos (distribution companies) to private investors, restructure the entire sector from the ministry of water and power to regulator, stop power theft by implementing harsh punishments, decrease transmission and distribution losses (currently costing $1.4 billion), recover the unpaid bills from private consumers and apply federal ‘adjuster’ to deduct bills owed by the provinces to Pepco, and manage demand.

The main objective of the plan is to make the country’s collapsing power sector profitable, bankable and investment-friendly in order to woo private investors in generation and distribution.

Some, however, consider the new policy as a ‘bad document’ produced by people who do not “understand the complexities and issues of the power sector”.

“The document does provide an insight into what the government wants to achieve before going in to next election. But it does not give us a roadmap as to how it intends to achieve its targets,” argues the former Pepco boss. “The authors of the document apparently did not consult the people who comprehend the issues and requirements of this sector. They did not even bother to involve the provinces in its preparation,” he contends.

The provinces were briefed on the ‘national’ policy during the last meeting of the Council of Common Interests (CCI) last Tuesday for their approval before its announcement by the Prime Minister. Sindh and Khyber-Pakhtunkhwa are said to have had some objections to its certain parts dealing with the role of the federating units in controlling power theft and recovery of unpaid bills and sought time for preparing their response on the document.

The policy makes provinces responsible for punishing power theft and recovering 70 per cent of the bills, failing which the unpaid bills will be deducted from their share in federal transfers. The provinces, barring Punjab with highest recovery rate, are not prepared to take the responsibility of the Pepco mismanagement, officials said. They are not happy with the application of federal adjuster for the recovery of their ‘disputed’ unpaid bills, which they consider were exaggerated and bloated.

A senior serving Pepco official says the entire plan stands on two pillars: full recovery of the cost as dictated by the International Monetary Fund for its fresh loan and selective privatisation of the state-owned power companies. “No thought has been given to the fact that a majority of the consumers cannot and should not be made to pay the cost of electricity stolen or lost during distribution. Nor does the policy discuss plans to improve the sector without selling it because certain businessmen with interests in the power generation business and close to the Pakistan Muslim League-Nawaz government and its leadership want privatisation of profit-making Discos,” he says.

Another former managing director of Pepco Munawar Baseer also agrees that the power sector — Gencos and Discos — can be made efficient and profitable without selling them to private investors. “When we say we want to sell a state-owned company, it amounts to conceding that we do not have a single honest and able person left in the public sector. This is not true. We have people who are capable of turning the state-owned power companies into efficient and profitable businesses.” He says those who gave the example of privatisation of Kapco choose a wrong example. “Kapco was most modern plant, which was sold because the then government of Benazir Bhutto was in need of money. It was not sold because it was inefficient.”

Sobani agrees. He advises the government against selective privatisation of the distribution companies. He is of the view that the government must sell Gencos but keep Discos in the public sector and revamp them to improve their efficiencies and make them profitable. “Cherry picking while privatising power companies should be avoided,” he argues.

It, nevertheless, appears the privatisation of selected power companies over the next five years will the main pillar of its power sector reforms.

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