According to a Business Recorder exclusive report, the federal government is considering ending the constitutional restriction of not allowing provinces and private sector to generate more than 50 MW without federal approval with the objective of enhancing generation capacity. This, according to informed sources, is being labeled as an out of the box solution to the ongoing crippling energy problem in the country. It is evident that this out of the box solution has not been well thought out at all. While granted that the provinces and the private sector should be allowed to produce electricity without a maximum limit but the power is to be distributed through the national grid which is under the control of the federal government. In other words work is required to draft agreements, after discussions with all stakeholders required to ensure the success of such a proposal. In the absence of such a policy this proposal is not so much an out of the box as out of the realm of possibility in the near future solution. Be that as it may, assuming that a draft is agreed the critical question is whether this alone would be able to resolve the crisis? The third-party audit on rental power projects undertaken by the Asian Development Bank concluded that the major problem with the energy sector is not one of generation, though total capacity generation was acknowledged to be lower than demand. However, it was argued that the shortfall should not have resulted in more than a couple of hours of loadshedding per day, but that of inability to operate at capacity. And this is due to the massive rise of circular debt premised on a 70 to 80 percent monthly utility bills collections with the federal and provincial governments the main defaulters, followed by influential private individuals as well as Federally Administered Tribal Areas. Circular debt thus continues to compromise the liquidity in the power sector thereby disabling Pakistan State Oil (PSO) from paying for the needed fuel imports. At present, five Independent Power Producers are in court seeking their due amounts from federal government entities. Additionally, massive distribution and transmission losses as well as theft of electricity also add to the woes of this sector. The power sector also complains that the price set for electricity is way below the cost of producing electricity - a cost that is rising commensurate with the rise in fuel in the international marketplace. Additionally, our energy mix is steadily tilting in favour of thermal generation (as a percentage of total energy produced) over other cheaper sources of fuel resulting in cost of production of electricity rising at a fast clip. Given this background the multilaterals led by the World Bank proposed a set of power sector reforms considered critical to resolving the energy crisis in 2008 under the Stand-By Arrangement with the International Monetary Fund, that Pakistan's government agreed to in writing in its Letter of Intent. The reforms included eliminating subsidies notably inter-disco tariff differential that is in effect a subsidy to the poorly performing discos, a conditionality that a political government, as expected, has been unable to meet. Ensuring 100 percent collections of utility bills could have been implemented but the government seems to have shied away from implementing this as well. The Sindh government as the single largest defaulter owes in excess of 50 billion rupees and federal minister Khurshid Shah who hails from Sindh was charged with the responsibility to discuss the issue with the Sindh Chief Minister. However, a meeting between the two has yet to take place on the matter. Distribution and transmission losses due to old equipment or deliberate theft in which the linesmen are complicit have also not been dealt with proactively with many in the power sector complaining that when they proceed to disconnect defaulters they are ruthlessly beaten up and no protection provided to them. Thus the power issue is serious but a large part can be dealt with through ensuring that the circular debt is eliminated through improved policing and discussions with large defaulters.
No comments:
Post a Comment