GOVERNMENT’S PERFORMANCE IN POWER

SECTOR: A MID-TERM REVIEW Seminar Report

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Government’s Performance in Power Sector: A Mid-Term Review Seminar 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

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.

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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 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

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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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