Perturbed by the consistent dilly dallying in implementing the agreed energy sector reforms, the Friends of Democratic Pakistan (FODP) have asked the government to take all political parties on board to devise a national energy crisis management plan for continuous implementation in next five years otherwise the matters may get worse.
A source in FODP said that the advice was given after the outcome of the recently held energy summit, where it was noted with concerns by the donors that despite having knowledge of the gravity of the situation, the required political will was absent due to fear of political back lash. The political parties are not supporting implementation on energy reforms due to upcoming general elections.
We have asked the government that the energy reforms require immediate implementation and there is no possibility that half hearted efforts will yield desired results, he said adding that reforms are required to be implemented in a holistic manner across the board and will take three to five years to come out of the crisis. “There are no quick fixes. The reforms process definitely will be painful”. Terming the energy crisis, as a complex problem, he said there is no single solution available. “Financial engineering” is required and it will not happen without fixing the hole, “circular debt”. The government needs to firstly plug the circular debt as we cannot keep pouring our money. If immediate steps are not taken the government may end up giving a massive power subsidy of Rs 450 billion this fiscal year.
Observing that there is a serious disconnect between the Ministry of Petroleum and Ministry of Water and Power, even though both have a similar mandate, as they were making contradictory policy planning and decision making. The matters may get worse with the entry of provincial governments in the arena, which have their own ambitious plans. “FODP has advised appointing a focal person for energy sector with decision making authority, as too many chefs, many ministers and provincial departments, will spoil the broth”, he added.
The government estimates energy growth at a rate of 8 percent per annum while the donors estimate it over 12 percent during the last three years. They don’t have money for new generation and private sector will not venture forth till the circular debt issue is resolved. The government offers no incentives for improving efficiency of existing generation plants, who will be shifting to coal in this scenario. About the solutions, he said two set of recommendations are given for improving the supply demand balance and improving financial health of the sector. The major recommendations stress improving corporate governance in distribution companies (DISCOs), making boards responsible for all decisions and allowing managers to make decisions and shifting the administrative control over DISCOs to provincial governments. Focusing on cost recovery tariff is the major recommendation for improving financial health of the sector as well as paving the way for further investment in the sector. Timely determination of tariff and its notification will help resolve the liquidity issues. The government should focus on policy, regulation and monitoring, with the DISCOs responsible for implementation and operations.
