Even after showing some forward movement on the power sector reforms, the government still remains at loss on how to address the sphinx like riddle of changing the expensive fuel mix that not only holds the economy hostage but also grips the financial sector, halting possibility of new investment in the energy sector. A complex maze of bureaucracy, including ministries of finance, water and power and petroleum and their numerous allied departments, though facing a similar problem, have failed to adopt a joint strategy to be implemented on war footing to come out of the quagmire. Despite a 75 per cent increase in power tariff during last two fiscal years, the woes of consumers are far from over as they are persistently faced with long black outs.
During the last three decades the energy mix has changed from 70 per cent hydel in 1980s to 30 per cent in 2000s, with enhancement of share of thermal generation to 70 per cent. The expensive thermal generation, resulting from an increase in furnace oil prices from Rs34,000 tonnes two years back to Rs74,000 per tonne at present have caused numerous woes for consumers. Whatever steps government takes to address power outages in the short term will lead to abnormal increase in power tariff for consumers due to high fuel costs.
Pakistan has not managed to undertake any mega hydel power project after the completion of Tarbela hydropower project. Failure to evolve political consensus and no decision on public sector investment in new mega hydel power projects have resulted in the present crisis. Even though friendly countries and international financial institutions (IFIs) have shown commitment to finance the most feasible hydropower project of Kalabagh dam, the government has evaded taking a decision. Its priority remains Diamer Bhasha dam, which the donor community is reluctant to finance.
Coal and wind power could be tapped in the short term but the lengthy bureaucratic procedures have delayed new investment. Government has notified a feed-in tariff for the wind projects but still matters for expediting land allocation in coastal areas need to be settled. Thar coal potential remains untapped in the presence of circular debt as foreign investors and banks are reluctant to invest in the projects without addressing the root cause. Every month a massive Rs25 billion piles up in government’s account due to the power differential subsidy and massive line losses. The matters are made worse by the litigation which has withheld passing on the fuel price adjustment to consumers and increasing the 14 per cent increase in power tariff. In this situation, even the interested investors for LNG imports were having second thought as it would be primarily used for power generation. Government has ended the administrative control of Pakistan Electric Power Company (PEPCO) over the power sector but the Central Power Purchasing Agency (CPPA) will take months for it to function. Same is the case with bringing professional management at the power distribution companies (DISCOs), as despite efforts CEOs for DISCOs were not finalised during the current year. The most worrying aspect is the professional boards brought in for DISCOs with the claims to enhance their efficiency were unable to perform their policy making task on being unaware of their powers.
All these failures have at least created awareness in the government of having professionals in the ministries for policy making and implementation. Creation of specialised technical wings in the ministry of water and power and ministry of petroleum have been approved and if competent professionals were appointed there are chances that the government may start to move in the right direction even though the ultimate aim of energy security would still require years if not decades in future.
