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Punjab chief minister Shahbaz Sharif has recently claimed that the PML-N government would not only overcome the power crisis by the end of the current year but it would produce so much surplus electricity that it could even be exported to the Narendra Modi-ruled India.
But with increasing reports that the monster of circular debt is rearing its ugly head again doubts are appearing that whether such promise could be fulfilled and there are fears that people have to again face another harsh summer.
Circular debt has, of late, been one of the major problems of our power industry.
The present government after coming into power in 2013 cleared the entire Rs480 billion in circular debt it inherited in one go as a first step towards resolving the power crisis.
There were hopes that the circular debt would be kept under check and since the government had won the elections with a resounding majority there was a general optimism that it would use its strength to take concrete measures to rid the power industry of the malaises which has literally crippled its performance.
While there have been considerable decline in power outages over the past one year and a half and the government tried to address the problems faced by the power sector, the results are far from satisfactory.
Secretary Water and Power Mohammad Younus Dagha in a newspaper article a couple of months ago claimed that government has overcome circular debt issue to a large extent and painted a rosy picture about the performance of the power sector, claiming that it has come out of its worst financial crisis.
He backed up his assertion by providing figures showing decline in distribution losses, significant raise in recovery of unpaid bills and reduction in energy subsidies.
The biggest achievement, in his words, was government efforts to limit the increase of annual arrears to just Rs8 billion in 2016 from whopping Rs200 billion every year, meaning that the level of circular debt was capped close to Rs348 billion.
But if recent reports are to be believed then it sounds that problems of the power sector are as serious as they were before.
The Independent Power Producers Advisory Council (IPPAC) recently placed advertisements in the newspapers warning that the monster of circular debt is rearing its ugly head once again, effectively contradicting Water and Power secretary claim that it has been put under check.
According to IPPAC calculations, though circular debt stood at Rs414 billion as of February 15, the verified, audited and undisputed figure to be paid to IPPs is Rs254 billion.
Analysts say the circular debt issue would further aggravate in the coming months given the increase in international oil prices.
Most of the Council members called for invoking of the sovereign guarantees for the payment of due amounts. Additionally, Pakistan State Oil has called for immediate payment of Rs30 billion out of Rs290 billion owed by producers to it.
The IPPAC’s advertisement evoked strong reaction from the Private Power and Infrastructure Board (PPIB), warning legal action against the IPPAC members for maligning the board through publicity campaign.
Industry officials fear that intensification of the row between PPIB and IPPAC would send a negative signal to foreign investors who have already been wary of putting their money into Pakistan because of Reko Diq fiasco and other such issues.
Crippling power outages were one the major issues agitated by the PML-N during its 2013 election campaign and it had promised to resolve it permanently after coming into power.
Prime Minister Nawaz Sharif in his public addresses has been promising to people that the power crisis would not only be overcome but government is making strenuous efforts to produce electricity at affordable price.
Analysts say much of government’s efforts have been focused on increasing power generation and it may succeed in producing surplus electricity but it is unfortunate that it has failed to introduce badly-needed energy sector reforms to address the long-standing problems afflicting the industry.
“They had made promises in their election manifesto about power sector reforms but those promises have largely remained unmet,” Dr Shahid Hassan Siddiqui, a renowned economist said.
The ruling party had promised total elimination of circular debt, creation of energy and natural resources ministry after the merger of ministry of water and power and petroleum ministry, privatisation of power distribution and generation companies and replacement of power generation from high-cost imported fuel to that of one based on indigenous fuel.
But the government, which is close to completing its fourth year in office, has very little to show it achievements on these promises.
Siddiqui also questioned government’s claim that it had brought down budget deficit to 4.6 percent in last fiscal year than 8.6 percent in fiscal year 2012-13.
“In fact, they paid Rs480 billion in circular debt and showed it the budget deficit in that year,” Siddiqui said. “Right now, the circular debt has risen to almost same previous levels but they are reluctant to clear these dues as it would result in sharp increase in the budget deficit which they want to avoid at this moment.”
Moreover, he said the Senate Standing Committee on Finance has also cost doubt on government’s taxation as well budget deficit figure.
Former secretary Ministry of Petroleum and Natural Resources Dr. Gulfaraz Ahmed, however, sounds hopeful and says the power crisis could still be overcome, at least by the end of 2018, if things are managed properly.
According to him, Pakistan is switching much of its power generation to non-expensive non-oil based sources.
He said Liquefied Natural Gas (LNG) based power plants in Balloki near Kasur, Haveli Bahadur Shah near Jhang and Bhikki near Shaikhupur would go a long way in mitigating power shortages.
The Balloki and Havel Bahadur power plants were initially expected to be completed by early 2018 that could have given a big boost to the PML-N election campaign but they are now likely to be ready for operation by the end of next year because of delay in the delivery of high efficiency gas turbines from their American supplier.
Ahmed said there are also elaborate plans for power generation from other non-oil sources like water, wind, nuclear and solar. “If they (government) speed up the pace of completion of these projects then I am hopeful that power outages would be reduced to minimum level by the end of next year.”
He said less dependence on expensive oil for power generation would also help in overcoming the circular debt problem to a large extent. “One could anticipate easing of circular debt problem as well as power shortages by the end of 2018. We are moving towards those goals.”
The writer is a senior journalist based in Islamabad
