EDITORIAL: Some things never change; no matter which government comes to power or which goes out of it, legally or illegally. And at the top of the list is the state of the economy, particularly the twin crises of the external account and power sector. The former always closes the year in the red because an import-fed export industry never exports enough, even when combined with home remittances, to offset the import bill.
And the latter has long been plagued by the so-called circular debt (CD) with no administration yet displaying the ability or the will to deal with it in any effective and meaningful manner. The PML-N (Pakistan Muslim League-Nawaz) government made a dubious, unaudited one-time payment the last time it was in power, but it soon became clear why the move was ill-advised as the circular debt shot past the previous mark to new highs.
It’s clear that tough decisions will have to be taken, especially when it comes to the CD; but what exactly? Just the other day Nepra (National Electric Power Regulatory Authority) made its displeasure known about its continued growth despite an increase in the consumer tariff. Perhaps, as they grope in the dark, authorities should lend an ear to proposals by the Public Private Partnership (PPP) Authority which concentrate on controlling the accumulation of CD through ‘better models of institutional governance and a firm strategy of reducing reliance on imported fossil fuel resources’. If done correctly, it could well lead towards building an indigenous energy economy that may also bring down the price of electricity besides reducing its carbon footprint.
Indeed, more and more countries are leveraging private sector capital and expertise to support renewable energy (RE) projects and adopting policies and laws that encourage and facilitate such investments. The idea is to employ the business-to-government (B2G) model to provide energy to government entities by involving the private sector. It is encouraging, therefore, that Nepra is working on institutional, regulatory and policy frameworks which will support private sector players in the provision of energy.
Already the enactment of the Punjab PPP Act 2019 is being hailed as a ‘key milestone’ and the PPP Authority in the province has several projects in the pipeline that are intended to approach different sectors of the economy through a sector diversification strategy involving water, transport, energy, housing and tourism. An agreement for PPP projects worth Rs50 billion has already been executed while ventures worth another Rs200 billion have also been earmarked.
Market liberalisation through PPPs has been encouraged for a long time by many different stakeholders. The private sector brings result-oriented efficiency that is shamefully lacking in almost all government departments. Introducing this practice to the suffering energy sector and tapping indigenous and renewable resources stands to reduce electricity prices, control the circular debt and also result in a lower carbon footprint; which is very important considering the country’s vulnerability to acute climate change. The government ought to give this matter much more serious, and urgent, attention than it has so far.
It should, in fact, also find PPP solutions to stop, at least slow, the hemorrhaging in State-Owned Enterprises (SOEs), as often argued in this space. The country already runs far too many unaffordable deficits and must block leaks whenever and wherever possible. Let’s not forget that the CD grows every minute of every day and constitutes an unjustifiable black hole in the energy ministry’s finances. This market will eventually have to be liberalised and opened to the private sector. And until that is done there is very little chance of doing anything at all about things like the CD. It should be worked out in complete detail, with input from all stakeholders, if PPP is really the way to turn off the CD tap.
Copyright Business Recorder, 2022