Energy autarky as a national policy

Pakistan has faced a series of energy crises since 2007. Unfortunately, however, it all had been predicted long ago but the concerned quarters did not lend an ear to the warning.
However, this debacle teaches us a lesson that such warnings have to be heeded and plans should then be updated from time to time. Coming over to the efforts of the last three years, we see that much has been done in the power sector, while petroleum and gas sectors do beg for the limelight. We see that the faltering power sector has been bolstered by clearance of Rs 301 billion of accumulated circular debt, capacity additions to the tune of 2890 MW, some additions through recovery of lost capacity in the GENCO plants, increase in power tariff by 64% (on the average) to bridge the cost of supply and revenue gaps, monthly fuel price adjustments to take care of any rise in fuel prices etc, disconnection of defaulting governmental consumer as normal consumers, conservation in the day to day life and lastly even a semblance of priority has been accorded to the power sector (when it comes to financial outlays and some provision of gas). On the strength of all these achievements, there are all the chances that the sector would come out of the morass, subject to the condition that the present level of management does not come in way.
However, the issue that has defied full resolution seems to be the extremely tardy completion of various imperative power projects. Similar is the situation with the oil and gas sectors. The few examples of the whole energy sector that come to mind are the presently held-up 425 MW Nandipur and the 525 MW Chichu Ki Malian Combined Cycle Power Plants, the LNG Mashaal Project, the Iran-Pakistan Gas Pipe Line and the badly stuck-up development of the mega Kunnar-Pasakhi Deep Tando Allah Yar Gas Project. Another example would be the Rs 62.533 billion Mangla Raising Project - for some delayed by over four years at an additional cost of Rs 40 million or so. As the last project was to add 12% to the generation of the hydel power station and a stupendous 2.9 MAF to the reservoir capacity, one can imagine the lost opportunity. And when we consider the magnitude of all such projects, we can easily conclude that the delay is costing immensely. On the other hand, had all of these projects seen the light of the day as envisaged at the time of inception, the situation would have been much different.
It is additionally considered that future projects will face the same fate as the various procedures overseeing procurements and contracting are extremely tedious and formulated with the single view of assuring what is billed as competition and transparency. It is seen that these rules were formulated at a time when the OEMs and the various patent holders were skimming their clients and holding the end-user to ransom. Besides, public sector procurement/contracting was being conducted in a hush-hush manner, which precluded the best. It was thought that this stranglehold would be broken and both quality and the right prices could be assured. Another group of policy makers thought that the new rules would allow new entrants a level-playing field.
That, specially the Pakistani public sector could not enforce the pre-qualification part of the new rules and had to keep itself tied to the lowest bid system, probably was not contemplated then. On the other hand, these procedures, while causing extreme delay, have not been able to ensure corruption-free results and have somehow also resulted in the relegation of the leading companies from the competition. All contracts, barring a very few, have also been considered to be tainted. These controversies lead to further delay, which is unacceptable and condemnable ( specifically in the present circumstances. In view of the above, there is a need to take up priority measures to speed up the projects, while also assuring true competition and the needed level of transparency. Regarding the former pre-requisite, it is considered appropriate that competition should be arranged amongst leaders of a particular field (known to all) and no pretender should be allowed to spoil the both. And once the open competition amongst peers is arranged, the needed level of transparency can be achieved. This would also assure the attainment of the design life of infrastructure projects.
Another serious inhibiting factor in the timely completion of projects, is the long and arduous procedure of sanction for public sector projects through the concerned ministry and various steps in the Planning Commission till the final approval of the Ecnec/Cabinet. All this can be partly attributed to a lack of some core competencies at the various levels of hierarchy, including that of the sponsoring agency. The other factor that further complicates the situation is the pressure for awarding works to the lowest bidder. Actually, most do not comprehend that being lowest responsive is distinctly different from being the lowest bidder. The mere fact that the eventual quality of work cannot be assured at the start is another serious facet of the contracting activity.
The relegation of European, Japanese and American companies and the ascendancy of Chinese on the basis of lower bids has resulted in many serious problems. Time and price overruns are a logical outcome of such awards and surely a bane for a developing country like Pakistan. Imagine, the opportunity cost and the actual financial outlays that have to be made to complete a delayed project. The two-envelope system of tendering somehow helps in the selection of the right kind of contractors/suppliers, but this methodology too is dependent upon many certifications/documents which are known to be easily arrangable and the actual situation only transpires and comes to the forefront when the projects are long completed and are found to be below par on actual delivery. Additionally, we see that presently the total burden of assuring quality etc falls on the project authorities, without much onus on the contractors. An apt example would be Pepco's 150 MW FBC Lakhra Power Station, which is operating at only 10% availability since its completion in 1994. This could otherwise have been a success story and a harbinger to the use of coal as generation fuel. We see that the present rules and the way of doing things makes the sponsoring agency attain a nearly adversarial role which leads to either battles or simple acquiescence to the whims of the suppliers and contractors. In case the activity is restricted to sectoral leaders alone, these problems then can be overcome to a great extent.
As the country is facing serious energy crises and that the demand is going to quadruple in the near future, somehow such systems have to be evolved which can overcome all the above impediments and obstacles. The new systems should cater for fast tracking of imperative projects through priority clearance/approvals, a competition between already pre-qualified but the best possible contractors/suppliers in a particular category of works/supplies, transparency through the monitoring of an oversight committee and the removal of certain investigative agencies from such a role. The last of the above recommendations is of prime importance because this is causing more problems than solving any.
Here, a case study of the South Korean power crises of the 1990s is of great importance. The South Korean President nominated the prime minister to head a committee overseeing the contracts for relevant projects. In this particular case, he was assisted by an official each from the ministries of finance and planning and the head of electricity utility. The committee was granted broad powers. Because of the above way of fast tracking projects, South Korea was able to reduce the lead time of project completion by upto two years in some cases and happily the crises was overcome in under three years. It would be of great importance to inform the readers that during this period all relevant professionals had to nearly live in their offices/places of duty. All leave and holidays were cancelled and no one was allowed to take any break. However, there was no outside intervention and the concerned enjoyed full powers. Incidentally, South Korea now possesses the best of power infrastructure in the world. It has also achieved energy autarky and has recently won the US $15.00 billion UAE Nuclear Power Generation Project and that too against world-wide competition.
What should be done in the Pakistani context? How can the future be secured or would we ever stand subjected to delays and time over-runs, as is the norm presently. It is suggested that we do not wait any longer, hold some of the stifling rules at bay for mega/infrastructure energy sector projects and instead form a special committee comprising the minister concerned, the head of the relevant entity responsible for the project, the finance minister and a senior representative of the Auditor General Pakistan. This committee can also be structured to have the leader of the opposition or his nominee sitting on it.
All cases of procurement and contracting of mega infrastructure projects would be processed by the relevant agency, which then would send the portfolio to this committee and the process would necessarily entail pre-qualification of world leaders in a particular category, bidding amongst them, a strict evaluation on the basis of standard world best practices and award of the project to the lowest pre-qualified one after approval of the special committee itself. This way of doing things would save at least 50% to 75% of the time being spent presently and also assure up-to-mark infrastructure for the country. As the committee would be broad based and operating across all sectors it would quickly attain the needed prowess, while it is envisaged to have the powers to co-opt any professional it deems fit. This would further empower the committee to deliver. Consequently, the public would have faith on this arrangement. In case further strength is required, then prominent business leaders and members of the civil society too can form a part of the committee. Actually special times and emergencies require change in the rules of business, hence the above way of doing things in considered the only way forward.