The energy challenge

Prime Minister Nawaz Sharif chaired yet another cabinet committee on energy meeting and was briefed on the status of ongoing projects, including those under the umbrella of the China-Pakistan Economic Corridor (CPEC), as well as the status of the LNG import deal with Qatar. In the CPEC there are clear indications that the government is not following procurement rules; however in this respect one can accept the rationale that as foreign investment is on the decline, China remains the only major source of investment - to the tune of 46 billion dollars. This massive investment would not be forthcoming unless some procurement rules are violated.
A press release quoted Prime Minister Nawaz Sharif as stating that "transparency and adherence to relevant laws and rules must be given topmost priority in all these projects"; additionally, the Prime Minister is cited as emphasising the need for enhancement of inter-ministerial co-ordination. This is the first time that a press release has cited these two directives being issued by the Prime Minister in the cabinet committee on energy meeting, no doubt reflective of growing media criticism of non-transparency, mismanagement and corruption in these projects. According to some reports the Prime Minister directed the Minister of Water and Power Khawaja Asif and Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi to defend their projects more ably than they seem to have done in recent months.
Energy shortages were widely regarded as one of the major reasons for the PPP-led coalition government's extremely poor showing in the 2013 elections - a failing that was picked up successfully by the PML-N during its election campaign. Thenceforth there has been little improvement in loadshedding and unfortunately the focus of the Sharif administration has been almost exclusively on enhancing generation rather than on ensuring that existing capacity is fully utilised first which, had it been achieved, would have led to loadshedding of little more than an hour each day. This was the advice given by the third party audit undertaken by the Asian Development Bank on the then highly controversial rental power projects.
The current situation of the energy sector is that in spite of a massive decrease in the international prices of oil, some of which has been passed onto consumers, the price of electricity has not come down due to: (i) the rising circular debt reflecting poor sustained governance; (ii) failure to significantly bring down the transmission and distribution losses; (iii) rising receivables in spite of the policy to cut off generation from feeders where receivables are above 90 percent; and last but not least (iv) the need for taxing electricity given the sustained poor performance of the Finance Ministry to check current expenditures and the Federal Board of Revenue's failure to increase its collections with the major increase in revenue coming from withholding taxes that are collected by withholding agents.
The focus on enhancing generation has already been subjected to significant pitfalls that opposition members attribute to corruption though pro-PML-N sources acknowledge mismanagement and/or simply incompetence defined as not taking technical advice on board. Nandipur is an extreme example whereby the government decided to add an additional 44 billion rupees at least to the PPP's 23 billion rupees to make it operational - an attempt that remains unsuccessful to this day for technical reasons. Other energy projects are also subjected to controversy not by the media or the general public but by sitting ministers hurling accusations against each other. The most recent spat is between Ahsan Iqbal, the Minister for Planning, Development and Reforms and Khawaja Asif and Shahid Khaqqan Abbasi based on Iqbal doing his job namely to review the cost incurred in projects and to curtail unjustified expenditure.
And to add insult to injury the Minister for Petroleum and Natural Resources has defended the secrecy that he has shrouded around the LNG import deal with Qatar insisting inexplicably that this is the norm in commercial deals. Around 10 to 11 LNG ships have already docked on our ports and yet there is no deal. Abbasi is constantly referring to deals by other countries and arguing that the price that we will get in the end would be lower; however with falling international oil prices the LNG import price plus the transport costs (given the nearness of the Qatar port to us) is ignored.
To conclude, there is clearly a lack of transparency as well as poor performance of members of the cabinet committee on energy - members who have held their respective portfolios as well as membership of the committee for more than two and a quarter years. Perhaps it is time for the Prime Minister to make good on his commitment to the nation soon after he took oath on 6th June 2013 namely to fire all those ministers who fail to perform.