Government’s Performance in Power Sector: A Mid-Term ReviewSeminar Report

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Government’s Performance in Power Sector: A Mid-Term ReviewSeminar Report

  Energy crisis is one of the major challenges Pakistan is faced with. The incumbent government has taken several initiatives to deal with the issue.  With the completion of half of the current government’s tenure, Institute of policy studies (IPS) organized a seminar titled ‘Government’s Performance in Power Sector: A Mid-Term Review’ held on November 18, 2015, in order to undertake an appraisal of their performance in power sector. The program was chaired by Mirza Hamid Hasan, former secretary, Water and Power, member of IPS-National Academic Council and chairman of its ‘Tawanai’ (energy) program. Mr. Ashfaq Mahmood, former secretary, Water and Power was the key speaker, while, Abu Bakar Madni, additional secretary, department of energy, government of Sindh also spoke on the subject. Other  participants who took part in deliberations include: Syed Akhtar Ali, member (Energy) Planning Commission of Pakistan; Maj-Gen (rtd) Akbar Saeed Awan; Sahib-e-Iqbal, Legal Consultant (energy sector); Syed Haani Masood, Prime Minister’s Performance Delivery Unit (PMDU); Hafiz Muhammad Mukhtar, Deputy Director Technical, Hydro Planning, WAPDA; Dr. Fuzail Siddiqui, consulting Geo- Scientist.  Ashfaq Mahmood critically evaluated the government’s performance in comparison with the strategic framework announced under Energy Policy 2013. A summary of his keynote presentation is as follows:

The government’s primary target was elimination of load shedding through commencement of new power generation projects and early completion of the one in the pipeline. While the government has been successful in reducing load shedding to certain extent, it cannot find a sustainable solution unless it pays heed to areas such as distribution, theft control, revenue collection, transparency, accountability and customer care, as well. To achieve the target of eliminating load-shedding by 2018, the present government had aimed at improving the performance of existing GENCOs, however as per State of Industry Report issued by NEPRA, the efficiencies of generation plants in public sector have declined by 11 per cent to 36 per cent of their design efficiencies. Similarly, distribution losses were in the range of 9.47 per cent to 33.40 per cent, as none of the DISCOs met the target set by NEPRA in 2013-14 while in some of the better rated DISCOs, namely FESCO, GEPCO, LESCO and IESCO, the losses even showed increase over the previous year in sharp contrast to NEPRA’s requirement to reduce losses. Conscious of the high cost of generation on RFO, the initial target of coal conversion also could not make much headway (Gadani Coal Power Projects shelved), due to logistics and transmission issues, except that a coal-based Sahiwal project is under implementation which again is reported to have been started without financial close. A number of other coal, gas based projects are on the anvil (Guddu, Jamshoro, Karachi).  Other power generation projects which fall under active

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projects list include K-Electric’s coal-based project near Port Qasim and a gas-based project in KPK. Two IPPs on coal (Kot Addu and Thar) are also on the anvil. The progress over Dasu and Basha Hydro Power projects is not satisfactory.  Though long-term projects, but do not seem to be coming on line upto 2022-2023; financial close of Dasu could not be reached yet. Neelum Jhelum is delayed. Tarbela tunnel 4 is expected to be completed before 2018. It may help reduce the load shedding. Three LNG based Projects though can be commissioned in time if there are no hitches in implementation which pose challenges such as financing, fuel supply chain, transmission etc. The solar park at Bahawalpur has started making some contribution but it is expensive. Energy Conservation Law is still pending for the last many years and pending in the parliament since last three years. For installing Smart Meters, legislative improvements are still elusive and there is no proper strategy visible. In case of Time of day meters, partial success has been observed.Against the target of increasing revenue collection from 87% to 95%, NEPRA State of Industry Reports for 2012-13 and 2013-14 show that the revenue recovery as percentage of amount billed in IESCO has fallen from 94.44 to 90.41%, in GEPCO from 98.25 to 96.14 and in HESCO from 81.19 to 79.16% while there had been only marginal improvements in other DISCOs. The recovery in QESCO increased from 31.83% to 42.19% and in SEPCO from 53.53% to 59.69% over FY 2012-13 to 2013-14.  On the policy front, there is lack of coordinated, sustainable and integrated policy making. Certain projects were initiated and at mid-course it was realized that the projects are not feasible e.g. shift from coal to LNG. Power policy 2015 has been improved but there are some gaps. The policy guides in the right direction but product of a hasty process breeding considerable waste in implementation. For market reforms, the objective was to create a new business model based upon whole sales transactions, exchanges and wheeling charges to incentivize the private sector for investments in transmission, especially for the new generation plants to be installed in off grid or in areas where the grid is weak. However, while implementing the same, though the Central Power Purchasing Agency (CPPA) has been separated and market rules as submitted by NTDC have been approved by NEPRA; but the contents of those rules do not serve any of the reform purposes, since all the capacity of IPPs is committed to CPPA under long term contracts. In the planning sector, the performance was based on knee jerk approach. It was based on wish list or idiosyncrasies of the individuals who matter. Planning Ministry has been acting like an approving or stamping machine. There was no study or research on Macroeconomic Affordability and Micro Affordability of the projects. There was confusion over priorities and too much dependence upon import. The indigenous hydro power potential was not given preference.  There was no focus on indigenization of technology and every project has been put in the basket of China Pakistan Economic Corridor (CPEC). As far as the performance in management and institutional area is concerned, it is an area of neglect. Eight secretaries have been changed since last four years in the Ministry of Water and Power. Conflicts between central and provincial governments are discouraging. In the energy sector, while the reduced number of institutions increase efficiency, the number of intuitions have been increased. The mandate of Council of Common Interests though intensified after 18th Amendment, is not meeting as per the constitutional requirement.  Cabinet committee on

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energy has been established but the meeting are attended by only the chief minister of one province. Other performance parameters such as Transparency, Accountability and Competition are also negative. Circular debt kept on surging, reaching 300 billion rupees, while the audit of the previous payment has never been done. Though, Nandipur project was not already transparent, only its one unit could come into operation. There remained confusion about the price of LNG. The controversial rental power projects were transformed to fast-track projects. An updated information about any project cannot be found on the website of MWoP. Ther is no transparency over the issue Gadani and there is no accountability in respect of the money spent on these projects. The most significant area of Customer Care was not even among the current regime’s objectives. The privatization of Discos is another issue which is proceeding as per GoP’s commitments with IMF, with little effort on improving their existing performance.  Syed Akhtar Ali defended the approach of the Planning Commission and claimed that the amount of efforts being made by the present government in the energy sector are unprecedented and the sector is gradually improving. New projects are initiated and the electricity short fall has reduced from 8000 to 5000 MW. He maintained that there was no significant investment made in Gadani, so, shifting from Gadani did not cost much. He also criticized the non-professional reporting of media over the energy issues. He lauded Institute of Policy Studies for the objective assessment of the issues. Abu Bakar Madni claimed a paradigm shift in Sindh government’s policies to attract investment in the energy sector and to exploit the immense potential in the province through public-private partnership. He cited the creation of a one-stop department, Thar Coal and Energy Board, and other initiatives of the provincial government like Sindh Renewable Energy Company to attract investments and joint ventures.  He said that Sindh government aims at making the province self-sufficient in power generation and export surplus to other provinces within next five years. Thar coal will be generating 5000MW electricity by 2020 while work on 35 projects of wind energy of an indicated total capacity of 1925.4MW has been initiated. Many solar, micro-hydel and thermal projects are also in progress, he informed.  Pakistan’s energy crisis could possibly be controlled by early 2018 if all the implementation schedules of the 2013 energy policy strategic framework were duly met.  Setting the objective of the debate, it was concluded that the evaluation of the government’s performance was to highlight the areas of concern for improvement and not mere criticism.  Given the pace of development in energy sector which is still rated as of temporary nature as government’s most measures lack far-sighted all-round approach which was critical for good governance and institutional growth and performance.

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