AGL 8.30 Increased By ▲ 0.44 (5.6%)
ANL 10.59 Increased By ▲ 0.24 (2.32%)
AVN 78.60 Increased By ▲ 0.70 (0.9%)
BOP 5.45 Increased By ▲ 0.06 (1.11%)
CNERGY 5.59 Increased By ▲ 0.58 (11.58%)
EFERT 80.25 Decreased By ▼ -0.55 (-0.68%)
EPCL 69.60 Increased By ▲ 1.50 (2.2%)
FCCL 15.30 Increased By ▲ 0.74 (5.08%)
FFL 6.53 Increased By ▲ 0.33 (5.32%)
FLYNG 7.18 Increased By ▲ 0.53 (7.97%)
GGGL 10.85 Increased By ▲ 0.27 (2.55%)
GGL 16.79 Increased By ▲ 0.38 (2.32%)
GTECH 8.14 Increased By ▲ 0.02 (0.25%)
HUMNL 7.04 Increased By ▲ 0.02 (0.28%)
KEL 2.99 Increased By ▲ 0.11 (3.82%)
LOTCHEM 30.77 Increased By ▲ 2.24 (7.85%)
MLCF 28.98 Increased By ▲ 2.03 (7.53%)
OGDC 82.75 Increased By ▲ 0.60 (0.73%)
PAEL 16.97 Increased By ▲ 0.32 (1.92%)
PIBTL 6.08 Increased By ▲ 0.24 (4.11%)
PRL 18.10 Increased By ▲ 1.35 (8.06%)
SILK 1.15 Increased By ▲ 0.05 (4.55%)
TELE 11.25 Increased By ▲ 0.28 (2.55%)
TPL 9.20 Decreased By ▼ -0.02 (-0.22%)
TPLP 19.88 Increased By ▲ 0.22 (1.12%)
TREET 26.46 Increased By ▲ 0.55 (2.12%)
TRG 94.60 Increased By ▲ 0.99 (1.06%)
UNITY 19.50 Increased By ▲ 0.50 (2.63%)
WAVES 14.34 Increased By ▲ 0.78 (5.75%)
WTL 1.30 Increased By ▲ 0.06 (4.84%)
BR100 4,187 Increased By 80.1 (1.95%)
BR30 15,474 Increased By 343.5 (2.27%)
KSE100 42,096 Increased By 670.9 (1.62%)
KSE30 15,883 Increased By 222.7 (1.42%)

Briefing the National Assembly Standing Committee on Power on the performance of power sector, its financial position, and other issues, federal secretary for power stated that: “If any sector that will sink the country’s economy it is the power sector, as the volume of subsidy is 12 percent of total budget, which is higher than the defence budget and annual development budget. The sector lost Rs 1.072 trillion in just one year and with earmarked subsidy added, the sector is the biggest loss-making government institution and is functional only on account of Finance Ministry’s extraordinary support”.

This is a rather strong statement, reflecting deep anguish, frustration and helplessness of a top official who is actually in charge of this sector’s matters. Last year, Rs 2.892 trillion was spent on electricity production whereas the government received only Rs 1.535 trillion; these figures show a shortfall of Rs 1.351 trillion.

Many stalwarts in successive governments have tried to narrow the gap through a carrot and stick policy combined with cosmetic and politically motivated reforms but none has worked because none of them ever took the pain to find out the underlying causes through a forensic audit of the whole supply chain of the power sector to unearth the fault lines so that probable solutions, starting from fuel procurement to supply of electricity at the door step of the consumer and then the very conduct of the consumer itself, could have been found.

There are serious fault lines in the sector — all of which leading to a circular debt of Rs 2.253 trillion as of June 30, 2022 of which the amount of payables to power producers is of Rs 1.351 trillion and Gencos’ payables to fuel suppliers stand at Rs 101 billion. The payables to the fuel suppliers have crippled some of the prime oil entities of the country, notably, Pakistan State Oil (PSO). PSO, once a blue chip company counted among 500 Fortune companies of the world, is now almost bankrupt.

The prevailing phenomenal increase in generation cost, which includes higher prices of imported fuels, notably the LNG, and capacity payments to power producers by passing this increase in fuel prices on to consumers has further increased the share of subsidy and will exponentially increase the circular debt further threatening the country’s economy.

The view expressed by the secretary is a reality and behind this reality is a long trail of corruption in each and every segment of the sector. While accountability in the country is a sham process and the one with influence and money can wriggle out of it with the perpetrator of the offence rejuvenated to strike once again. However, the damage inflicted on the national economy on account of rampant corruption along the whole supply chain of the power sector is unforgivable and must not be ignored.

It has deprived the government of its rightful revenue. It has crippled the state industry with high tariffs and long outages. And, it has brought our prime entities in the oil sector to bankruptcy.

The tariffs, notably for low income groups and small industry and shops, are carving out over 30 % of their meagre earning. Above all, it has positioned Pakistan perpetually dependent on the IMF (International Monetary Fund).

The payables to power producers are of Rs 1.351 trillion. Many of them are now shut due to cash flow crunch to procure fuel. The government continues to make capacity payments to idle IPPs (Independent Power Producers).

The problems in the power sector commenced from the early 90s with the induction of IPPs based on imported fuel into the generation system. Each government since the 90s exploited this policy. Someone must start the accountability from this point, although in the prevailing scenario the probability of such accountability is extremely low.

Copyright Business Recorder, 2022

Farhat Ali

The writer is a former President, Overseas Investors Chamber of Commerce and Industry


1000 characters
Muhammad Kashif Aug 06, 2022 05:15pm
“If any sector that will sink the country’s economy it is the power sector." The ground reality is that the power sector has been sinking the every portion of Pakistan's economy for many years. But we're feeling its intensity now.
thumb_up Recommended (0) reply Reply
SAMIR SARDANA Aug 06, 2022 06:38pm
......whereas the government received only Rs 1.535 trillion ASSUME that - that is all the GOP can get.One must note that SSI and Unorg sector which PAYS NOT FOR POWER - would disappear if POWER IS CUT - which is loss of jobs and purchasing power,social strike and possible radicalisation So the crux is the COST OF POWER - Rs 2.892 trillion - which had blown up in 2022 - due to oil and gas - which is risk to the soverign of Pakistan So this DAMOCLES has to be removed with his sword.DAMOCLES = IPP on GAS AND LIQUID FUELS and their sword is the PPA signed with GOP for USD tarriffs and Capa charges BEFORE THAT - U NEED A PERPETUAL ONE TIME FUEL COST FOR IPP IN PAKISTAN - AND THAT IS ONLY NUCLEAR POWER ! SOLAR,WIND,HYDRO,TIDAL ARE ALSO THERE - BUT NUKE POWER, IS IMMEDIATE RAMP UP PRC HAS CRITICAL MASS IN NUKE POWER.dindooohindoo ALSO,CLIMATE CHANGE CAN AND WILL, IMPACT RENEWABLES - BUT NOT NUKE POWER Y IS GOP NOT TAKING THE NUKE OPTION ? IS IT AMERICAN,WB AND IMF PRESSURE ?
thumb_up Recommended (0) reply Reply