Power sector reforms to take seven years to produce results: PM’s adviser

ISLAMABAD: The power sector reforms that have recently been rolled out in Pakistan to cut down billions of dollars of losses and reduce tariff for consumers through a comprehensive restructuring of the system would take at least seven years to yield results, a top government official told foreign media.

The country’s power sector has long suffered due to a number of policy and governance challenges, leading to distribution and recovery losses amounting to billions of dollars per year and putting undue burden on the national exchequer and consumers. The present government rolled out the reforms package in August this year to completely overhaul the system, which also includes power generation and distribution companies, and renegotiate tariff agreements with private and public independent power producers.

“We are hopeful to complete the main actions by December, but the reforms will take six to seven years to produce results,” Shahzad Syed Qasim, who advises the prime minister on power and is spearheading the reform process, said.

He said the reform process was launched to abolish the Rs2.2 trillion circular debt and put an end to the Rs500 billion of losses that were adding up in the power sector every year. “We have to reduce it,” he said. “The reforms are needed to abolish the losses, improve the system and make the power sector self-sustainable.”

Under the reforms package, the government aims to put an end to the losses in distribution, operations, transmission and dispatch system by strengthening boards of the operating companies through appointments of professionals, bringing in private sector management, and starting the privatisation process in parallel.

The country first started the power sector reforms in 1992 following a period of severe power shortages and could fully privatise only one company, K-Electric, by 2005, due to financial and political instability, according to a policy research working paper of the World Bank released in May last year.

Qasim, however, described K-Electric’s privatisation as a success story, saying the government was bearing around one billion dollars of losses before the privatisation of the company, and the robust reforms in it had brought down its losses to 23 percent from 42 percent ten years ago.

“The government will have to invest in other loss-making companies too until we privatise them,” he said, adding that the vicious cycle of the circular debt would continue until the completion of the reforms package.

Talking about renegotiated agreements with private and public Independent Power Producers and hydro projects, he said that his ministry had received a final report on it and would incorporate it in the tariff to know the overall savings.