The government is losing steam to resolve the energy crisis due to a lack of expertise in the concerned ministries, failure to reduce the price difference of various fuels, delay in backing energy imports, absence of rules for regulating the sector after devolution and above all, the failure to address the circular debt.
According to officials, whatever steps the government had taken during the last four years were short-term and no long-term plan had been envisioned for implementation due to a lack of expertise and planning at the central level.
It is evident from the fact that no new investment in the power sector has been made during the government’s four-year tenure. The Finance Ministry has also failed to decide on deduction at source of power dues of over Rs 150 billion dues of government departments, taking the plea that it was not possible after devolution.
Petroleum Minister Dr Asim Hussain has complained that the Finance Ministry was non committal on the proposal that sought reducing Rs 10 per litre levy on petrol to bring its prices closer to CNG.
He was of the opinion that the reduction in levy would not affect the government’s revenue, as petrol sales volume would increase with price parity. It would at least allow additional gas supply to the fertilizer, power and industrial sectors.
Lack of professionals in the ministries of water and power and petroleum is another major handicap. The ministry of water and power had to temporarily bring in a professional from NESPAK for better manage its power wing. The petroleum minister has ordered the hiring of an executive director general for hydrocarbons from the market to head the technical wing of the ministry in order to put the existing staff on the right track. He also ordered hiring of at least 25 percent new staff instead of promoting and deputing incumbent officials. Still, the establishment of technical wings in both ministries was delayed due to the red tapes.
The competence of the existing staff has degraded to such an extent that, sources said, the Petroleum Ministry was unable to devise a standard petroleum concessions agreement for the last many months, which was to be an integral part of the Petroleum Policy 2011. The implementation of new petroleum policy has already hit snags, as Khyber Pakhtunkhwa and Balochistan want to regulate the sector and own the royalty, without giving any control and share to the federal government. An official source said the situation could have been averted if the officials concerned had bothered to address the concerns of the province before and during policy making. The matter has now been referred to the Council of Common Interests (CCI) for resolution, though earlier, the Law Ministry had interpreted that the Centre would continue to regulate the sector and would have a share in royalty.
The delay in drafting petroleum policy means that no new blocks can be awarded for oil and gas exploration – the last auctioning of blocks was held in 2010 before the approval of the 18th Amendment. But there were other constraints in promoting indigenous exploration, as summarised before the National Assembly Standing Committee on Petroleum by Petroleum Secretary Ejaz Chaudhary, who said the Ministry of Defence had refused permission for an aerial survey of Kharaan block in Balochistan.
The source said changing the expensive fuel mix was a major issue for the government, which could not be resolved by expediting indigenous oil and gas exploration. This requires a national consensus to be implemented on war footing. The government has opted for the safest way to address the power crisis, by enhancing the power tariff, which despite being increased by a massive 75 percent during the last two fiscal years, has failed to resolve the issue. The people are burdened to pay massive power bills, but still have to fret for hours due to blackouts.
Government agencies are focusing on the expensive, mega hydel power projects, not on easy-to-build run of the river projects that could yield more hydel power in the short run.
Lack of public sector investment is another major cause for slow progress in hydel and coal sectors. Private sector investment has been on the hold, as local banks are reluctant to finance any new project until the resolution of the circular debt. Independent power producers’ receivables have soared to Rs 266 billion by December 31, 2011. They have to repay Rs 150 billion in debts to banks by the year end.
The circular debt is also affecting the prospects of private sector LNG imports in the country, as some of the investors have started seeking sovereign guarantees if their dues were not timely cleared by private sector entities. LNG imports will be used for power generation, but if the circular debt is not rooted out, nobody would be making $2 billion investment for the imports.
The government has an offer to import 1,000MW of electricity from India. But the move could have serious consequences for Pakistan, as it could be used by New Delhi to expedite water storage on three western rivers given to Pakistan under the Indus Water Treaty, as it could claim that the country was not interested to tap the hydel water resources.
Sources said the most viable project for hydel power generation remained the Kalabagh Dam, but the failure to have a national consensus was delaying its execution.