AMI project: good riddance?

The Advanced Metering Infrastructure (AMI) project by the Asian Development Bank (ADB) came to an abrupt end recently. A proposed $5 billion investment by the multi-lateral institution, the project involved installation of smart meters to improve billing and collection of DISCOs.

What comes as surprising is the decision by the government to ax the project, after approval had been given in both the Central Development Working Party (CDWP) and ECNEC forums. The project had been fraught with controversy from the start, with the Planning Commission being its vocal critic.

Recall that in 2015 according to the PC, the meter costs were substantially higher in the initial proposal and the ADB had then decided to increase the number of smart meters by roughly 50 percent in Lahore Electric Supply Company (LESCO) and 20 percent in Islamabad Electric Supply Company (IESCO).

But that was just one issue. Initially, the PC had serious reservations about the benefits the project would yield in the first place. According to sources, the preliminary figures proposed by the consultant hired by the ADB had been grossly off the mark when it came to reduction in transmission & distribution (T&D) losses.

In addition, the selection of two of the better faring DISCOs at the time i.e. LESCO and IESCO made no sense for initial implementation of the AMI project. These should have rather been installed in DISCOs such as SEPCO. QESCO and PESCO where losses were the highest which would have resulted in more reduction in T&D losses

However, the Ministry of Water & Power (MoWP), had been fully supportive of the project since the start. After incorporating some of the reservations of the PC, it had gotten the project approved by ECNEC in November, 2016.
One may wonder why the sudden change of heart now by the MoWP. How come the shortcomings were not identified at a much earlier stage? Was it necessary to spend $1 million in commitment charges and risk spoiling the relationship with an important donor partner?

This incident is just one example of how government institutions fail to do their proper due diligence when it is actually required. The MoWPs reason for not proceeding ahead with the project because the DISCOs will ultimately be privatized also does not hold steam.

If the recent past has been any indication, the government has only been enlarging its presence in the power sector. Not even a feeble attempt has been made to privatise the DISCOs.

In their current institutional capacity such a huge amount of expenditure by DISCOs on borrowed money would undoubtedly have proven imprudent. The realisation that installing AMI meters are not what the DISCOs actually need right now, should have sunk in a lot earlier. Rather the focus should be on improving governance and make headway into privatising them.