Pepco's revival

ARTICLE: Pepco (Pakistan Electric Power Company) has been revived under a legal arrangement of being a "Managing Agent". The role of Pepco, briefly speaking, is to monitor and coordinate the operations of Discos. There is a mixed reaction to the revival of Pepco. This writer is in favour of Pepco's revival. We will explain the reasons of such support while examining and evaluating the objections of those opposing it.

Pepco had been formed in the wake of dismemberment of the monolith of Water and Power Development Authority (WAPDA) which used to control the whole electricity sector, as a part of the electricity reform process leading to commercialization and competition. This led to the formation of many organizations like National Transmission & Dispatch Company (NTDC), Discos, Gencos, Central Power Purchasing Authority-Guarantee (CPPA-G), National Power Construction Corporation (NPCC) and eventually private sector Independent Power Producers (IPPs). More fractionation is expected while we move towards a competitive market. Wapda continues to operate as an independent entity dealing with hydropower and water, while Pakistan Atomic Energy Commission (PAEC) continues to be active in the nuclear power and fuel sector.

Pepco was, however, almost dissolved except in legal terms, largely as a consequence of power politics between Disco management and Pepco. A new ideology and utopia emerged of autonomy and independence of Discos under independent boards of directors (BoDs). By now, the honeymoon period of BoDs has also ended. BoDs have been tried and tested in the meantime and could not deliver the expected results. It was a wrong expectation ignoring the ground realities. BoDs could not attract professionals in a significant number to be effective, nor was any serious effort made to induct them. Political and other influences largely influenced the formation of BoDs. Even if BoDs were totally composed of professionals, it was a bit too much to expect that the BoDs would be able to handle the kind of issues the Discos were facing: T&D losses, receivables, etc. What can a two-hour meeting in a month do in terms of guidance and effective over-sight. BoDs have their role of oversight of a limited statutory nature. In any case, BoDs did not enjoy much power. The effective control and coordination had been vested with the Ministry of Water and Power (MoWP); and now it's with the Power Division.

MoWP and later Power Division tried to do what was neither expected of them nor were they capable of doing it. They did not organize he ministry as, e.g., the MPNR/Petroleum division did. They have several directorates general for oil, gas, policy, concessions etc. Consequently, the rationale and justification of the revival of Pepco has emerged. Apparently, MoWP/Power Division seems to have supported it. It is their greatness that they have allowed it. And, there appears to be an all-round consensus. A lot of power would still remain with the ministry, but involvement in day-to-day affairs and operational matters is expected to go away due to the intermediary layer of Pepco.

Pepco should not be considered an unnecessary burden. Even private groups have group/head office teams meant for monitoring and coordination of the constituent companies despite individual companies' BoDs. While, there is merit in autonomy and independence of individual operating companies (Discos), there is an equal need for knowledge and experience sharing; pooling of resources and what is called critical mass. Nuclear reaction and release of energy (for that matter organizational reaction and activity) takes place when there is critical mass.

In this process of march towards commercialization and the heavy involvement of International Financial Institutions (IFIs), what has suffered most is the technological development and indigenization. Aid or loan giving agencies have discouraged local capacity building and have promoted international competition which has helped expand the market of international companies and have discouraged local companies and technology development of the country. Even under China Pakistan Economic Corridor (CPEC), which is supposed to be a benign arrangement for mutual benefit of the two brotherly countries, local companies and technology development have suffered. China has changed from the times when it built Heavy Mechanical Complex (HMC), Railway Carriage Factory and other enterprises. Part of the fault lies with our institutional decay and decomposition.

We have been following a western model or no model at all. In the West, companies like GE, Boeing, Microsoft and the like which pool up the technology and have the global market share to provide for the technology development. In small and underdeveloped countries, companies are too small to cater to the requirements of national technological base. Institutions or institutionalized companies ought to be there, in our case, to achieve this. Even NASA had to be made and supported by the US to be able to compete in the domain of space and space craft and communications. China has managed to compete with the US and others in the area of steel, chemicals and others due to institutional support and critical mass approaches.

Pepco (and other companies) can do this, beyond operational issues. Turkey and India have done it and now their technological level is much higher than that of Pakistan. Let us forget comparing ourselves with South Korea, China and Japan who had identical per capita incomes in the 1950s. Malaysia, Indonesia and even some Arab countries are moving ahead. All local contracts, even of garbage picking, are going to foreign companies resulting in drain of foreign exchange and lost opportunities for the development of local know-how, organizations and companies and technologies. More than 10,000MW of generation capacity projects have been added but there was no involvement of local companies except for petty contracting. Heavy Electrical Complex (HEC) is bankrupt without orders and nobody willing to buy it. Liberalizing policies over the last more than 2 decades have only increased imports and haven't had caused any meaningful increase in exports. Over the last more than two decades, Pakistan has stagnated technically and technologically. This cannot continue without causing permanent damage to our sustainability and economic survival.

In this broader context, and less broad sectoral perspective, Pepco should do more in the area of promoting and accumulating technology and indigenization. The coming PEPCO leadership and the Power division should study the model of CEA (Central Electric Authority) of India. And strengthen its technical sections on the model of CEA. One may consider, giving Gencos under the control of Pepco, which are currently being controlled by the Power division directly under the garb of independent BoDs. CEA India is, practically, a technical arm of the power sector of India. CEA provides all kinds of technical support to the power sector in India; from developing specs and costing for power plants, power grids, grid code and any other technical issue etc. Its role is advisory but tends to prevail eventually in most cases due its technical prowess. It is not suggested here to ape the functions of this organization model in toto; adjustments can be made according to local ground realities.

One could suggest a separate organization on the model of CEA India in order to please and satisfy those who wouldn't like revival and expansion of Pepco. We would like to, however, suggest building of a critical mass, as discussed earlier. There are people, who may be concerned about the cost aspect. Induction of meritorious people assisting in developmental and operational aspects results in short and long-terms, visible and invisible savings. Let us be positive and hopeful that this time PEPCO would not disappoint us and would be able to deliver much more than what has been charted for it by the mandarins.

(The writer is former Member Energy, Planning Commission)

Copyright Business Recorder, 2020