With the power subsidy escalating to Rs 128 billion during the July-May period of the current fiscal year the government has worked out a power subsidy to the tune of Rs 120 billion for the next fiscal year. An official source said if the power sector reforms were not implemented, the government would have to increase the power tariff to up to 20 percent during the next fiscal year.
Improvement in power sector governance is urgently required as the demand is expected to increase to 25,000MW by 2014-15, which requires an investment of over $35 billion in the next five years. The energy sector in Pakistan is still largely state controlled and both, the Ministry of Water and Power and Ministry of Petroleum and Natural Resources, require to fast track the ongoing public sector investments in the energy sector.
Independent Power Producers (IPPs) supply about 7,000MW of power while the PEPCO-operated GENCOs and WAPDA have the capacity to supply 8,000MW at peak demand. The source said the implementation of reforms were stressed as the public sector organisations remain plagued with managerial and administrative problems, extreme lack of funding due to tariffs being set at below cost recovery, non-payment of receivables, and delayed payment of subsidy by the government.
Similarly, he said the petroleum sector was dominated throughout by parastatals right from the exploration to marketing. The cross and hidden subsides exist in the entire energy chain. As a matter of prudent policy, it has been proposed that subsidies should only be paid if absolutely unavoidable and then only as direct targeted subsidies which are fully transparent.
The managerial problems of the state owned enterprises, pervasive stringent regulation and circular debt have not hindered private sector investment in exploration, development, transporting, and refining.
