EDITORIAL: All the trouble that the government went through over the last few months to give explicit approval to MoUs signed with four dozen Independent Power Producers (IPPs) could well be for naught because apparently a lack of “visible” mode of payment is keeping the understandings from being converted into legally binding agreements. The government, doing what it could to get the ball rolling, wanted to give tradable instruments to the IPPs but it turned out that the International Monetary Fund (IMF) did not approve of it. So the IPPs have thrown a spanner in the works yet again and are refusing to proceed until their payments are guaranteed in black and white, which has left everybody in the finance ministry scratching their heads over what type of instrument to offer them to move things along. Now even as the government will look for ways to untie this particular knot other irritants like the circular debt will keep growing of course. All this could not have happened at a worse time for the government because the bailout programme with the IMF is still stalled and it is slowly caving in to its condition of a rise in power tariffs to unlock the rest of it.
It’s a bit rich of the IPPs to use such tactics at such a time. First they used previous sovereign guarantees to force arguably disproportionate deals literally down the government’s throat. Then they made a big fuss about the lump sum payment. And now they are needlessly slowing things down because they know that the government is desperate. And for the longest time before this administration finally sat down and tried to sort a few things out with them, they sought to exploit the fine print in their deals and reaped abnormal profits whether we used their power or not. Therefore, the government must not waste any more time and energy by trying to work out an instrument of payment that is to their liking, though that is exactly what Finance Minister Dr Hafeez Sheikh seems to be doing, instead it should put its foot down and refuse to be dictated to by them any longer. In their own interest, IPPs would do well to realise that they are already on borrowed time and just do not have the staying power to continue to make purportedly ridiculous demands of the government like they are used to doing.
The post-Covid world will be very different from the one that sleepwalked into it last year. Most countries will emerge economically very badly bruised, especially poor ones like Pakistan, and will allocate resources far more efficiently than before. And as the prime minister’s advisor on institutional reforms and austerity, and former State Bank of Pakistan (SBP) governor, Dr Ishrat Hussain is pointing out all the time these days, everybody will have to focus on sunrise industries to stay competitive in the new world. That, simply put, means wind and solar energy will just muscle out fossil fuel-based power producers. So it would be in everybody’s interest, including the IPPs, if the MoUs in question are signed into agreements without any further delay. The government of Pakistan is good for its word and that should be the end of it.
Prime Minister Imran Khan admitted recently that the biggest problem facing the country when he took over was of energy, especially the crippling circular debt. Now, as his government tries to solve this problem, he must also order a thorough investigation into everything that led to such a terrible state of affairs. And for that, as this newspaper has repeatedly demanded, he must order a forensic audit of the complete supply chain of the power sector. Needless to add of course that any such exercise would be meaningless if it didn’t begin with the IPPs themselves. It is primarily because of them, after all, that the power sector is completely broken down, the debt is out of control, and energy is so expensive that households are miserable and the export sector has been rendered un-competitive. To top it all, it is the government that has to answer for all the problems faced by the people. This state of affairs should now end and IPPs must be made to do whatever is necessary for it.
Copyright Business Recorder, 2020
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