Power sector

The incumbent government adopted a focused and realistic strategy to tackle the gross mis-governance in the power sector and some success has been achieved in terms of improvements in receivables and arrest of power theft.

But the task is too humongous and complicated to be effectively accomplished in a short period of time considering the high incidence of mis-governance this sector has been subjected to for decades.

The PTI government inherited a well-entrenched regime of incompetence, widespread power theft, line losses, rising power generation and distribution costs and tariffs - all accumulating into an ever-rising circular debt.

Critical is the rising power tariffs making our industry uncompetitive and the circular dept severely denting the country's economy.

The latest on the subject is the central Power Purchasing Agency's recommendation to increase electricity tariffs by Rs 1.73 per unit to shift Rs 16 billion increase in electricity charges onto consumers. More such increases will follow in times to come.

The stock of circular debt continues to swell. During the last two fiscal years, circular debt escalated from Rs 1.14 trillion to Rs 1.4 trillion of which Rs 755 billion is emerging from Power Holding Company.

Time and again this writer has stressed the point that circular debt is not a financial issue but a governance issue.

The PML-N government, upon taking over the reins of power in July 2013, inherited the circular debt, which by then was of Rs 500 billion. It was a time when terminology of circular debt came under public focus as a major issue. When PTI government took over, it had ballooned to more than double standing at Rs 1.14 trillion and in the last two years it has increased by 23 percent.

The PML-N government, during its tenure of five years, made many financial adjustments to wipe out circular debt but to no avail. The incumbent government too rolled out financial adjustments but the menace continues to persist.

Circular debt is the outcome of lapses down the whole supply chain of power sector, inclusive of fuel procurement and its supply to power generation companies, the conduct of Independent Power Producers related to oil pass-through, power evacuation, idle time payments, the conduct of power producers in the public sector, the conduct of power distribution companies and also the conduct of the consumers.

There is a need to carry out an independent audit of the said full supply chain to identify the gaps and take effective measures to bridge them to effectively address the issue of circular debt and other ills adversely affecting the power sector of the country.

The incumbent government has taken some measures to better manage the power companies in the public sector by changes made on company boards. But, in the face of incompetence down the management tiers, vague systems and processes, lack of accountability and similar governance lapses there is not much the company boards can achieve.

There is a need for a major overhaul of the entire power sector requiring extensive management change at number of tiers, automaton of systems and processes, comprehensive audit of the entire supply chain.

This is indeed a humongous task but a doable one. Ad hoc measures to address the rising electricity tariff and ballooning circular debt have not worked up to now. They are not likely to work in future as well.

(The writer is former President of Overseas Investors Chambers of Commerce and Industry)