The way Pakistan’s energy sector has developed over the years comes as a stark contrast to what was originally envisioned in its energy policies. For example, one of the goals of the National Power Policy 2013 was to encourage private sector participation and allow for greater competition.
An excerpt from the policy reads “Government would like to limit its role to policy making, and unless necessary, service delivery will be promoted through a fiercely competitive and transparent private sector.”
However, the role of the government has only continued to expand. Its failure to open up transmission and distribution aside, the PML-N government also took the decision to increase the government’s footprint in generation by setting up R-LNG power plants.
Recently, the PTI government has given approval to privatise two of these R-LNG power plants which include the 1223 MW combined cycle power plant at Balloki, Kasur and 1230 MW plant at Haveli Bahadur Shah, Jhang. The power plants are currently held by National Power Parks Management Company (Private) Limited, which is wholly owned by the Ministry of Water and Power.
This is a good decision for two main reasons. One is the fact that the plants are newly set up and are one of the highest efficiency power plants in the energy chain. The sooner they are privatised; the maximum privatisation proceeds can be gathered from the sale taking advantage of their condition. These proceeds will help the government in its fiscal woes and if the buyer is in international firm, some precious forex might also flow in. The second reason has little to do with money and more to do with the eventual state of these power plants. If the performance of state-run GENCOs is any indication to go by, these R-LNG power plants might end up in a similar condition.
In a report titled “Performance evaluation report of public sector GENCOs FY14-16” NEPRA put the total energy wasted by GENCOs during 2014-16 at 15 billion KWh. The problems highlighted by the regulator include poor governance, equipment deterioration and an overall lack of accountability in operational affairs.
Therefore, it only makes sense to follow the energy policy in spirit and limit its role in power sector affairs. Once, momentum gets going and these power plants are successfully privatised, it can bring impetus to privatising the rest of the power sector supply chain.
However, privatization in Pakistan has historically been a slow and tedious affair with prior governments unable to structure deals in a beneficial manner for the state. How fast can the government close the deal on these power plants? Will the incentives provided currently including take or pay contract provision be extended to the buyer? Where will the proceeds from privatization be utilized? These are some questions to ponder upon.
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