There is ample power generation capacity in Pakistan today. And credit to those who made it happen. There will still be load shedding in Pakistan come peak summers. Blame them who never made a thing happen on this front. Don’t confuse generation capacity with generation capability, because the entire power system is as much, if not more, rotten as it was six years ago.
That the distribution sector is the weakest link in the entire power chain has been well known. That it continues to be the same is disturbing. The sector’s T&D losses were 18.59 percent in FY13. That was very high and 40 percent worse than the global average. The T&D losses today stand at 18.6 percent. Very high and 60 percent worse than the global average. Surely, whatever medicine, if any at all, has been prescribed, has not worked. The doctor needs to change, and with it the diagnosis and prognosis.
What makes matters worse is that the regulator continues to incentivize inefficiencies – by allowing a disturbingly high limit of T&D losses in the final tariff. Worse still, the distribution companies never fail to disappoint, by consistently missing the target by a considerable margin. When the National Power Policy 2013 was announced, it envisioned limiting the actual T&D losses and allowable limit by one percentage point every year. A look at the table tells that surely has not happened.
In fact, the quantum of loss in rupee terms is much higher than it was in FY13 – as the generation availability has increased significantly over the period. That the other vital element of the equation, i.e. energy affordability, has long been forgotten is altogether another debate. The focus is distribution losses, and there is no respite. In many cases, the regulator has actually allowed higher T&D loss, only for the respective discos to even miss that.
With nearly Rs200 billion collected from consumers on account of power lost midway – the gap between allowed and actually T&D losses would still be around Rs35-40 billion. Remember circular debt? The toll stood at Rs808 billion by the end of December 2018. And no, this does not include Rs600 billion odd TFCs issued in the name.
Recall that the recent exercise of power tariff increase in the name of price rationalization is not going to improve the situation much either. The revised tariffs and the industrial subsidy has created another subsidy bill to the tune of Rs250 billion annually (read: Power tariffs: who will foot the bill? published Jan 10, 2019). There is little reason to believe the government will have the capacity to smoothly pay the power generation companies without clearing the existing stock, when the demand goes high. The government will, almost on cue, revert to the same old practice of limiting generation, and instead settle on paying a few tens of billions on capacity payments, without having it generated.
The incumbent government cannot go on blaming the previous one forever. The system has to be revamped. Oddly enough, privatizing the discos is nowhere in the plans. Do whatever else you want to – change boards, conduct studies, strengthen theft laws – if you don’t privatize, the hemorrhage will continue. The circular debt should now be made a permanent entry in the national accounts. And if business as usual is what the government has in mind, then might as well, have a ‘circular debt cess’, to fund it. (Don’t please!).
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