News Analysis: No quick fix for loss-making power sector

December 07, 2023

ISLAMABAD: Pakistan’s loss-making power sector has turned into a rudderless ship whereby no one knows where it should be moved to fix its yawning losses, increasing with every passing day.

Based on both the record and background discussions held with power sector high-ups, there can be drawn the conclusion that there is no quick fix in the wake of accumulated losses in the shape of the provision of subsidies and piling up of a monster of circular debt that might go close or exceed the budgetary allocation of defense budget in the vicinity of Rs1,800 billion despite having all kinds of inefficiencies and burdening of masses with legitimate or illegitimate inflated billing especially for those living in central urban Punjab.

A general view of the high voltage lines during a nationwide power outage in Rawalpindi on January 23, 2023. — AFP

The most worrying aspect is that there is no crystal-clear roadmap to fix the power sector knowingly that the status quo approach might result in the collapse of the power system with its unsustainable burden. All those who knew the power sector argued in background discussions that there were two solution either to reverse and restore Wapda with full authority including generating electricity and then responsible for distribution and transmission of the power system or move the cycle of un-bundling of incomplete Wapda and privatise all DISCOs and GENCOs without wasting a minute.

The caretaker government has shelved plans to privatise Power Distribution Companies (DISCOs) and come up with concession agreements for leasing out for certain time period of 25 or 32 years period. There is a need to understand what the difference is between privatisation of lease out or concession agreements.

The Privatization Commission has backed out from privatization plan because it found that the balance sheets of these DISCOs were not cleaned up so instead of plunging into hectic task for cleaning up balance sheets, they preferred to float the idea of lease out for certain timeframe. The concession agreement will not solve the problem of DISCOs because it would not resolve the fundamental problem that how the existing balance sheet would be cleaned up for making it ready to be privatized once and for all.

Secondly, now the time has come to tackle the issue of capacity repayments with IPPs. Chinese IPPs are not ready to re-negotiate their deals. There is a proposal to request to restructure the loan repayment period in order to stretch it out for more than 5 to 10 years otherwise the monster of circular debt on Chinese IPPs was bound to mount it up to the more escalated peaks in months and years ahead. The future of the CPEC will be at stake if the repayment of Chinese IPPs could not be resolved amicably. Thirdly, there is a need to slash down dependence upon imported fuel in shape of RLNG and coal and replace it with domestic coal. Fourthly, the loadshedding should be increased in May and June period.

Fifthly, there is a need to establish regional connectivity as in summer the cheap electricity should be imported and in winter the surplus power should be exported to Central Asian Republics as well as to neighboring India preferred to sit and find out commercial aspect acceptable to both sides.

Sixthly, all mainstream political parties should clearly demonstrate their policies in the elections manifestoes that how they are going to resolve the complex situation of power sector because only sloganeering will not resolve perplexed issues of the loss-making power sector anymore.