There are reports that more than Rs 800b circular debt has accumulated in power sector. This is in addition to Rs 450b circular debt that was cleared by the incumbent government in start of its term, which the critics termed as gift to the power mafia whose majority belongs to the ruling elite. It was pointed out in this space time and again that country’s power policy was deeply flawed due to privatisation, writing off of circular debt, no plan for overcoming load shedding, increasing power generation and adoption of renewable energy. Consequently the country will continue to face load shedding, increase in per unit price, circular debt and corruption with dire consequences for national economy, industry, exports and jobs.
The fact of the matter is in last three decades or so the successive governments’ have been involved in corrupt practices in power sector at the cost of public, economy and industrial growth. It is a crime against the country which merits across the board accountability so as to bring an end to circular debt, load shedding and have surplus power to meet the needs of public, industry and revive the economy. Unless Pakistan takes following steps in next year or two, it may never get rid of its problems in power sector in decades to come.
Pakistan needs to adopt renewable energy on war footings to meet its national and international obligations. The per unit solar energy prices have dropped to Rs 2.44 in 2017 in India. A solar company will generate 7.5GW of solar energy in Rajasthan at the rate of Rs 2.44 by the year 2019. Per unit wind tariff has also fallen to Rs 3.46 in India in February 2017 (SECI). As per the IAE’s latest renewable market analysis and forecast, India plans to take its capacity from 59GW to 175GW (100GW solar and 60GW wind) by 2022 and it will overtake EU expansion.
After surpassing America in use of renewable energy in 2011, now China is giving incentives to individual homeowners to shift to renewable energy and sell surplus power to the national grid. Greece passed a similar law in 2010 which allowed government to buy 375MW from rural communities which constituted 30 percent of the total energy production in the country. However, the powerful oil and gas lobbies forced the politicians to change the law in 2014 and the amendments brought to it 2017 again failed to attract investment in renewable energy in rural Greece.
Corruption is undermining power sector in UK also. Three successive British prime ministers since Brown have failed to support bank loans allowing home owners to shift to renewable energy. The privatisation of gas, electricity and water companies have resulted in three fold increase in prices which was done to cut utility prices.
In one survey it was revealed that six major UK energy companies were systematically abusing their consumers in different ways including over charging, taking advance payment and blocking them from changing the suppliers. The Competition and Markets Authority found 70 percent of domestic customers were overcharged £300 and as result the customers have been paying £1.4b a year more than they would in a fully competitive market (31 January 2017, the Guardian).
Privatisation of power sector has failed Pakistan also. It should be nationalised. State has developed China’s power sector. Islamabad should learn from China, USA and India’s foreign currency-denominated tariff (FCDT) plan for solar energy.
Under the reverse bidding process, India’s state companies will provide purchase guarantees for 15GW solar project developers, make such project bankable and help solar power eventually cost the same as that purchased from the grid (grid parity). With developers expected to quote bids in region of Rs 3.50 per unit, Pakistan’s WAPDA can sell the power to provinces at Rs 4.75 per unit, with balance going to national exchequer to cover foreign exchange risk and overhead costs.
Since our government has failed to end corruption in power sector so state should help courts to recover Rs 1250b (450+800) circular debt lost to vested stakes. The EU blacklist includes UAE and Bahrain that are second homes of our corrupt politicians. The European lawmakers also backed a plan allowing withdrawing of banking licenses for “promoting or enabling financial crimes or aggressive tax avoidance”.
Similarly, China punished 210,000 people on corruption charges in 2016 including death penalties under country’s anti-corruption policies. Islamabad should help judiciary to end corruption and bring the culprits to book to help recover Pakistan’s looted wealth ($500-700b), eliminate corruption, for nation building and public welfare. It is hoped that world including Gulf States, The UN, the EU and allied anti-corruption and money laundering setups will cooperate with Pakistan.
Finally, Islamabad can use successful global models to overcome country’s power shortages, end circular debt, adopt renewable energy, cut reliance on fossil fuels, IPPs, end costly fuel imports, bring down per unit cost (under 5 rupees), end corruption and make Pakistan energy surplus to improve economy, revive industry, exports, reduce cost of living and create jobs.
—The writer is senior political analyst based in Islamabad.