IMF and the power tariff

Showing traditional annoyance, IMF in the talks at Islamabad was reported to have required the GoP to assure charging of monthly, quarterly, six monthly and annual adjustment charges – ostensibly, to fulfill the revenue requirements of the Sector. In other words, IMF desires that the Sector, which is nearly stalled at the moment, may start operating.

In addition, it was once more averred that GoP’s plan to mitigate the ever-growing circular debt would not only contain it, but in fact reduce it in a very short period. Along with the information were the tidings that very soon the present exorbitant power tariff too would be hiked-up – surely, to assure all of the above.

In other words, the only solution that we know would be put into action. That, it was the solution that GoP was implementing since long was forgotten and the new hike in offing was hailed as a brand-new panacea for our ills.

Increasing price of utilities is being taken up at regular intervals, while improving efficiency of the sector is being given lip service only. Why is it so and why has the efficiency of the whole sector not ever been discussed or whether it is to be blamed for all the existing ills. Furthermore, isn’t the same Ministry of Energy (MOE), in actuality, responsible for the continuing illnesses.

Coming to efficiency, we see that, at present, the power sector is most inefficient and then leaking at all of its seams. Generation is racked by a shut public sector-owned capacity – barring two specific new plants like Guddu 747 MW and the Nandipur CCGTs.

The existing estates are not in use or even contemplated to be – just because of an extremely non-professional management through the so-called GHCL (Genco Holding Company Limited)– further managing the four GENCOs and the BoDs that are ancient and beyond local repairs. That these sites could have been used for PPPs never came to the mind of the managers – indeed a national loss.

The IPPs and the PPAs further hold the nation as a hostage. All treatments to these ills till date have been an eye wash, to say the least. The only redeeming factor is Wapda’s HPPs (Hydel Power Plants) and PAEC’s (Pakistan Atomic Energy Commission’s) plus 5000 MW of NPPs (Nuclear Power Plants). The private hydro IPPs (Independent Power Plants) are also a rip-off.

NTDC (National Transmission and Dispatch Company), the national TRANSCO, is said to be a den of corruption and inefficiency – specially, when it comes to procurement and contracting. Not to be left here, NTDC is also assuring that it remains unable to transport the needed power – in the face of ample generation, to the various areas – specially, during high demand times of the year. The TRANSCO is also a bulwark against induction of RE to a great extent.

Coming to the Discos, we see them to be a waste ground with non-professional BoDs, temporary CEOs, a below-par senior management, technology mired in the 1960s, AMI under assail by local assemblers of metering equipment (without patents or principals) and 60,000 vacancies amongst imperative staffing, etc.

Lastly, the failing writ of the state that spawns the non-payment of bills culture in huge swaths of the country, besides allowing illegal abstraction of energy which is nearly the proverbial last straw on the camel’s back. The PM’s most recent statement that stealing has annually reached the level of Rs. 500-600billion or so caps it all.

As to why he told the nation so is not known as his government is responsible to put a check on the continuing theft and no one else. The optimists think it to be a harbinger for a new campaign to stem theft, but the pessimist correctly assures that it is just his acceptance of a fact and nothing else.

Consequently, Discos are unable to deliver though the asking is most outrageous as how can these companies assure collection of the bills based on a huge part of the burden that is due to the earlier badly negotiated PPAs (Power Purchase Agreements), corruption in contracting and procurement of material and services, etc., and lastly on account of the illegal reaping of the political economy of the Sector. That the BoDs of GENCOs, the GHCL, NTDC and the DISCOs itself also add on to the burden is another onerous issue to contend with.

Coming to the gat- keeping MOE’s Power Division, we see it to be bereft of any sectoral professionals and further has no idea as to how the sector can or has to run and operate. The Division is most busy in its self-assumed duties which too are undertaken in the pick and choose manner. Only the DISCOs are in focus as if Gencos and the NTDC belong to some other planet.

Probably, the technicalities of the latter are too much for the generalist. So much so that even SECP’s (Securities and Exchange Commission of Pakistan’s) fit and proper criteria for the BoDs are ignored and recommendations have been made to pack the BoDs with politically aligned non-professional persons and that too in droves.

The situation is so serious that one politico who had resigned six months ago from a Disco BoD to vie for a seat in legislature through elections has returned and taken over the chair as if nothing has happened. Imagine the devastation the gate keepers have out-leashed on the Discos.

The same Power Division of the MoE then assures that nothing changes, and the same style of operations remains in evidence. Even huge sums outstanding against the KE, AJK, provinces and the federal government are left to be. Example would be the CPPA (G)/NTDC power supply agreement with the KE that lapsed in early 2015 and could only be signed in 2023. In other words, the power division wastes more time than it uses to support sectoral operations.

It is thus most in-apt in gate-keeping duties. And now surely it would assure high rises in the present tariff to redeem the promises made to the IMF. In other words, there seems to be no effort to improve upon the present low level of efficiency – not alone in the Discos, but basically for the whole value chain. The most recent reference by the leaving care-taker Ministry for Energy regarding fraudulent coal contracting for one of the IPPs is a pointer in this direction.

As such the solution is not in just raising the tariff for the umpteenth time, but to take-up the cudgel to improve upon the efficiency of the whole value chain with special reference to the Disco operations, which basically have to clean up all the mess of generation and transmission – besides assisting the poor FBR (Federal Board of Revenue) to collect its taxes.

How can it be done? Simple: the MOE has to be duly staffed with professionals in senior decision-making positions who besides tackling the sector, would take up making the policy and plans implementable in the truest public interest. The second of the steps is to re-do all of the 18 BoDs starting with the GENCOs to PPIB (Private Power and Infrastructure Board) – and to assure that there is not even one free-rider or an inexperienced politico, but for pure professionals.

This is not difficult as professionals with due sectoral experience are available – normally, not liked by those who wish to illegally reap the political economy of the Sector. Once the above is done, the CEOs of all of the entities have to change – barring a few.

This too can be done from within the in-service professionals in a maximum of a month through a selection committee comprising of sectoral experts. As there are about 60,000 vacancies in the DISCOs, outsouring some services and filling-up of most imperative will have to be concurrently taken-up in a period of 60 to 90 days alone.

Having done this, the division of duties between the Power Division and the DISCOs –relating to a recovery of receivables and regular billing— will have to be affected. This is of great import as the receivables have reached a proportion equal to the circular debt. The receivables, unfortunately, comprise of the same against the GOP, the AJK, the provinces, KE and the tube-wells of Baluchistan – withheld due to the weak writ of the state. The rest of the Rs. 1.50 trillion is for the DISCOs to recover from the private sector, but surely with assistance of the GoP and LEAs (Law Enforcement Agencies), etc.

Containment of line losses are again dependent upon the level of GoP support which has to be available to the DISCOs. Experts’ opine that the above default has been piled-up all due to a disconnect between all of the entities involved starting from the MOE and downwards (including the provincial governments). In other words, if the above is corrected then there would be no need to raise and raise the tariffs as is the position at the moment.

Consequently, it is a conclusion that until and unless the above recommendations are not implemented, there are no chances for improvement and GoP will have to take up, not one, but many tariff raises in the immediate future to the detriment of people and the government itself. Actually, the bouts of tariff increases are not going to take us anywhere, while professionalism will indeed improve the situation and surely be reducing the need to keep on increasing tariffs, etc.

Copyright Business Recorder, 2024