Power sector: Experiencing poor governance

Suffering at the hands of the poor governance of this administration isn’t something new in the country. And the power sector affairs still remain a mess. While the operational – generation and distribution – side of the sector has seen some developments in terms of capacity additions in the last couple of years (though transmission continues to lag behind), the sector’s legal and regulatory environment, policies and reforms remain generally slow.

According to NEPRA’s State of Industry Report 2016, governance of public power sector entities is a major concern for the regulator. One big evidence of this lack of governance is the pilling up of the circular debt once again, which has crossed Rs400 billion as of recent updates.

And now it seems that instead of working to fix the inefficiencies in the sector, the government has once again adopted an ad-hoc approach where the finance minister has promised Asian Development Bank (ADB) to impose a set of new surcharges on the electricity consumers. This comes in for a $300 million loan negotiation with ADB for not being able to move ahead with the planned privatisation in the sector. Privatisation of DISCOs and power entities has stalled amid bureaucratic hurdles.

These surcharges will be in addition to what already exist: surcharges for Neelum Jhelum and tariff equalisation are already in place for doing away with the circular debt, which means a hike in power rates might just be around the corner with the additional set of surcharges. Not only has the circular debt situation emptied the sole purpose of the existing surcharges, it has surged further up.

It is true that the government’s continued centralization of power sector entities’ operations has led those to their deplorable levels of technical and financial performance. Permanently solving the circular debt issue, bringing down the subsidies, reducing the line losses, upgrading the infrastructure, and improving governance might be part of the government’s mission on paper, but remain a far cry from its actions.