Power politics Irfan Husain

YOU may not win an election by providing regular electricity, but you can easily lose one by failing to.

At the last general elections in 2008, the ruling PML-Q got hammered because of its failure to add to the national grid despite rising demand. The resulting loadshedding was a principal cause of its rout.

I recall all too well the claim of the ex (and forgotten) prime minister, Shaukat Aziz, that he would export surplus electricity to India. Luckily, negotiations broke down over the price, otherwise we would no doubt have been sued for breach of contract.A friend in England recently asked me about the riots in Punjab over the extended power cuts that were running to 20 hours in some areas. When I got to the notion of ‘circular debt’ in my explanation, I could see his eyes glazing over. He just could not cope with the concept of the government not paying its electricity bills.

And this, of course, lies at the heart of the present crisis. If public and private power-generating companies aren’t paid in time, they can’t pay their bills for the oil and gas they need. And when suppliers aren’t paid, they are forced to cut deliveries. This reduces power availability, and the lights go out across the country. Simple cause and effect.

In a recent article in these pages (‘Is circular debt the real issue?’ By Salman Khalid and Kamal Munir), the authors have argued that the real problem goes back to 1994 when the traditional 70:30 hydro-thermal ratio was changed, and a very generous tariff policy for independent power producers (IPPs) announced. Khalid and Munir argue that we need to increase hydro-electrical capacity, and use indigenous coal to generate power.

There is considerable merit in this argument. However, these are long-term solutions: people sweltering in the dark are
unwilling to wait for a dysfunctional government to do what several of its predecessors have been unable to for decades.

Building dams takes a lot of time and money, neither of which we have. And coal from Thar is reportedly of poor quality with a low calorific content. In any case, it will be several years before it can actually be used for power generation.

Even though Khalid and Munir term circular debt a ‘red herring’, it is nevertheless devastating the economy and has serious social and political implications. In a recent article on Pakistan’s energy crisis, the Economist came up with a figure of $6bn as the amount outstanding in the shape of circular debt. It also cites an estimated loss of three to four per cent of GDP as the cost of the power shortages.

The bankruptcy of the government’s energy policy was laid bare when the finance minister recently announced the federal cabinet’s plan to tackle the crisis. This included the decision to shut down offices for two days a week, and to close markets at sunset. Neither step has been greeted with rapturous applause by either the provincial governments of Punjab and Khyber Pakhtunkhwa or the business community.

One little-reported aspect of the whole mess was highlighted in a series of cables sent by the previous US ambassador to Pakistan, Anne Patterson. Revealed by WikiLeaks in this newspaper, they focus pitilessly on the cumbersome bureaucracy that is choking off any possibility of improvement. Patterson wrote in April 2008:

“The unbundling of the power sector has resulted in the formation of 14 corporate entities; three power-generation companies, one national transmission and power despatch company (NTDC) and nine distribution companies. These companies are each working under independent boards of directors. Yet, Wapda still controls the finances of all these companies and in turn must get permission from the Ministry of Water and Power to make payments to each entity.

“…While many proposals exist for creating new power generation, turf wars for operational control among the ministries and agencies have seriously slowed or completely halted the approval processes. …Timely decisions were not taken to utilise all available resources and no agency or ministry has the lead in implementing the National Energy Strategy.”

The cables paint a dark but accurate picture of the fallout of this confusion and neglect:

“With massive blackouts affecting every region and every demographic, energy policy and shortages are daily front-page news. Not a single megawatt of electricity has been added to Pakistan’s national grid since 2000 despite record-breaking economic growth and population expansion. With economic and manufacturing capacity slumping due to power outages, unemployment is increasing while tempers and temperatures are rising.”

I know we hate hearing the truth, especially from the Americans, but I would urge readers to go through the WikiLeaks cables that can be accessed on this newspaper’s website.

The Economist has also commented on the confusion and corruption surrounding the energy shortfall: “…the government of Asif Zardari has done little as the energy crisis has grown, dithering over its strategy even as it cooks up new schemes for new power plants to enrich its cronies. In the process, the government has squandered billions of dollars.” Had a few of these billions been directed towards clearing the circular debt, people in Lahore and elsewhere would not have taken to the streets.

Apart from the issue of unpaid bills, the problem of electricity theft and transmission losses of an estimated 30 per cent of generated power has not yet been tackled seriously.

In a land blessed with fast-flowing rivers, there is no reason for us not to increase our hydel capacity to lower electricity cost.

But as we saw during the Kalabagh dam controversy, people are very sensitive about the location of water storage lakes:

nobody wants their backyards inundated. But more importantly, those downriver don’t want to see their share of scarce water
further reduced.

Thus, Sindh has good reason to fear a further depletion of the life-giving Indus if more dams are built upstream. Farmers have seen canals irrigating their fields dwindle over the years. There is a serious inter-provincial trust deficit that will have to be addressed.

Above all, we need clarity of purpose if we are to solve this perpetual problem. What we don’t need is bureaucratic confusion and foot-dragging. Even more importantly, we need fewer snouts in the public exchequer trough.

Source: http://www.dawn.com/2011/10/15/power-politics-2.html

Govt announces relaxation in CNG loadshedding

ISLAMABAD: While warning the country that the shortage of gas would get severe this summer, the government on Friday announced reduction in the loadshedding of Compressed Natural Gas (CNG).

Petroleum Minister Dr Asim Hussain said that CNG loadshedding would now be carried out for two days a week instead of three, DawnNews reported.

Mr Hussain informed journalists that the government was in contact with transporters over the issue.

To a question, he expressed the hope that the Pakistan-Iran gas pipeline project would be completed within due time.

Source: http://www.dawn.com/2011/10/14/govt-announces-relaxation-in-cng-loadshedding.html

Cabinet comes up with old formula to cope with power crisis

ISLAMABAD: The federal cabinet again approved on Wednesday a formula to resolve the energy crisis that has failed earlier — two weekly days off, business closure at sunset and staggering of industrial holidays — to overcome increasing electricity shortfall during peak hours.

And surprisingly, the decision was taken this time without the consent of the provinces and without even consulting them.

The chief ministers were not invited to the meeting although the decision cannot be implemented without their active cooperation.

In fact, Punjab and Khyber Pakhtunkhwa publicly criticised the decision immediately after it was reported by the media.

And because the other stakeholders, the commerce and industries sector, had also not been taken on board, representatives of traders and industries expressed their displeasure and said the move would adversely affect businesses and industries.

Water and Power Minister Syed Naveed Qamar said the meeting presided over by Prime Minister Yousuf Raza Gilani had decided that provinces would be consulted for implementation of the decision on energy conservation because they had to play a central role in enforcement of business closure after sunset.

He said some designated branches of banks would be allowed to operate on Saturdays to address practical business problems.

The cabinet did not take a decision on a proposal to increase electricity tariff by 12 per cent because of paucity of time, and decided to address financial aspects of the restructuring of circular debt and related matters in its next meeting.

The meeting decided to disconnect power supply to defaulting consumers 45 days after non-payment of bills even if these included ‘sensitive’ connections.

“The cabinet decided to disconnect electricity without discrimination to those who fail to pay their bills, whether he/she is the president, the prime minister, chief of army staff, the provincial governments or any other government institution,” Finance Minister Dr Hafeez Shaikh told journalists after the meeting.

He said all institutions were given a budget every year and it was their responsibility to pay their power bills with responsibility, he said, adding the government was serious and firm in implementing the decision indiscriminately because it had injected around Rs1 trillion in the power sector over the past three years and yet unpaid electricity bills stood at about Rs300 billion.

Mr Naveed Qamar said the cabinet had also decided to do away with the current tariff setting mechanism under which the National Electric Power Regulatory Authority (Nepra) fixed different tariffs for distribution companies of Wapda, resulting in tariff differential subsidy in hundreds of billions of rupees because of equalised and uniform tariff for the entire country.

He said from now onwards, a single tariff application would be filed before Nepra which would determine a uniform tariff.

Nepra will also be revamped and strengthened.

Dr Shaikh said the government decided to involve the private sector in billing, metering and collection of electricity bills to improve overall recovery because the public sector had failed to deliver.

The cabinet agreed to privatise the Islamabad and Faisalabad electric supply companies, which were the best distribution companies in the country, he added.

The ministers sidestepped questions why reform measures introduced almost a decade ago for transparent electricity costs were being reversed and whether it was an attempt to camouflage increasing system losses of distribution companies in Sindh, Balochistan and Fata.

An official, however, explained that the separate tariffs were premised on continuation of a set of reform measures, including privatisation of these entities which could not be done.

Dr Shaikh did not answer a question about quantifying the cost of bad governance and delayed decision-making, but an official said the Rs1 trillion the minister talked about having injected into the power sector could be attributed to these factors. The amount would have been enough to construct Diamer-Bhasha dam and Munda dam, generating a surplus electricity of about 8,000MW.

Mr Qamar said Pepco – looking after 14 distribution, generation and transmission companies of Wapda – would be abolished in a few days and corporate entities would be made fully independent through professional managements and a private sector board so that they did not look towards the federal government for bailouts.

The management contracts would be signed with new chief executive officers and chief financial officers with specific targets and performance rewards. He said the cabinet had decided to double security deposit for new connections and for reconnections after disconnection owing to default. Life-line consumers using 100 units a month will be exempt from the increase in deposit.

The minister for power said efforts would be made to ensure full recovery of outstanding dues within six months.

Simultaneously, special concessions on power tariffs to Azad Kashmir and Balochistan would be gradually eliminated in consultation with the respective governments. In Balochistan, all agricultural tube-wells would be brought on metres to quantify their consumption so that the government could provide a flat amount of subsidy, instead of applying un-metered flat rates.

He said billboards and neon-signs would not be provided electricity after sunset.

He said it had been proposed to close down wedding halls across the country after 10pm. About 30 million energy-saving bulbs have been procured with the assistance of the Asian Development Bank and their free distribution would be completed by June next year. Also, the ongoing power projects would be fast-tracked to be completed in 18 months, he said.

Mr Qamar said the measures would reduce the demand-supply gap to a manageable level.

Dr Shaikh said the cabinet had also decided to refund to power companies Rs10 billion the Federal Board of Revenue had collected as general sales tax on unpaid electricity bills.

Source: http://www.dawn.com/2011/10/13/cabinet-comes-up-with-old-formula-to-cope-with-power-crisis.html