Shahbaz Sharif: A non-credible approach

Daily Times

Chief Minister (CM) Punjab Shahbaz Sharif is in the UK attending the Pakistan-UK Energy Conference 2013. The opening session of the conference was marked with a stunning disclosure by him that Pakistan would have plunged into darkness had his government not paid off Rs 480 billion circular debt, notwithstanding the fact that already Rs 100 billion of circular debt has accumulated since. If the CM was thinking he could convince international investors at the conference through such claims, he needs to brush up his knowledge on how investors operate. Did he think the heads of different energy companies and the prospective investors in the energy sector attending the conference had come without doing their homework? Being a businessman he should have known how minutely a project is researched even before it is considered worth contemplating. A sound strategy would have been laying the cards on the table and then pushing the case for developing the energy sector through full commitment. The rationale for going around the world with different energy development proposals and finding potential investors lies in the fact that the sector has crumbled under various anomalies. To top it all, the CM was focusing on something that is potentially an erroneous strategy to deal with the energy crisis facing the country. The enigmatic circular debt, mounting once again, will refuse to disappear unless the symptoms that cause it are addressed. The latest World Bank (WB) report on Pakistan’s economy and energy presents a grim picture of the energy sector deeply mired in a crisis, arising from issues such as the high cost of energy due to an increasingly unaffordable energy mix and subsidies, transmission losses, theft, faulty bill collection and debilitated infrastructure. The energy mix issue dates back to 1994, when the country switched to independent private producers and instead of adopting the relatively low cost gas-fired combined cycle technology, went for fuel oil thermal generation. Typical of Pakistan’s policy gaps, those planning the energy sector then failed to anticipate the future trends in oil prices, and paid no attention to developing new indigenous energy production sources. Coupled with the inability of the government to arrest endemic corruption, ultimately the power sector ended up in a shambles. Salvation from these anomalies lies in altering the energy mix to make it more affordable, thereby easing out subsidies, clamping down on theft, pressing the biggest defaulters, the government’s own ministries and departments, to pay their bills promptly, and upgrading infrastructure incrementally, including grid stations and power lines to overcome staggering transmission losses of 27 percent. According to the WB report, energy shortages are causing a loss of 2 percent of GDP. Hardly a ‘luxury’ we can afford.