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Mixed progress on eliminating power outages
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MoWP unable to achieve its target for increasing
generation capacity for 2015-2016
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Privatization of Distribution Companies (DISCOs)
rolled back amid political opposition
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Decrease in transmission losses and increased
recovery of bills in 2015-2016
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Sustained solutions required for tackling the
energy crisis
February 07: Facing more than eight hours of
load shedding on average, the rural consumer was seen to have suffered the most
from the country’s energy crisis in 2015-2016. As a result of the Government’s
focus on the revival of the economy, private industry only saw about one to
three hours of load shedding on average while the urban consumer still faced
about six hours of load shedding on average, analyses PILDAT’s Report
on the Performance of the Ministry of Water and Power (MoWP) during
third year of the current Federal Government.
Following the introduction of the National Power
Policy 2013, the Federal Government through the MoWP has been attempting to
address the challenge of providing affordable, reliable, sustainable, and secure
energy with relief from daily blackouts. Three years later, some progress has
been made but the short-term goals have seen mixed results. These include addressing
the gap in the demand for energy through focusing on increasing power generation
and decreasing the cost of generating power. As part of its plan to enhance
the installed generation capacity of electricity by 1,027 MW during 2015-2016,
the Federal Government only added a total of 402.66 MW. Pakistan has also suffered
from a high cost of generation due to the dependence on crude oil based thermal
power plants which formed 66% of all power generated in 2014-2015. However,
despite crude oil prices having fallen in the past two-year period, power subsidies
remained high.
The privatization of generation and distribution
companies was one of the cornerstones of the National Power Policy 2013. In
2015-2016 the Federal Government announced and then backtracked on plans to
privatize three Distribution Companies (DISCOs) amid political opposition. Instead,
Initial Public Offerings (IPOs) for a minority share in ownership of DISCOs
are being offered to the private sector.
A key recurring factor that has impeded progress
in tackling the electricity crisis has been the issue of ‘circular
debt’. The issue is primarily of a cash flow problem that leads
to operational inefficiencies and liquidity constraints as it cascades down
to other components of the payment chain. Using figures from the IMF, the stock
of payment arrears has increased from Rs. 313 billion in June 2015 to Rs. 321
billion in June 2016. The power sector because of low oil prices has been able
to keep the arrears under manageable levels, which helped the independent power
producers to keep afloat.
The PILDAT report however noted positive progress
in the management of power losses through the national grid and systematic theft.
Through the use of capital expenditures to strengthen infrastructure, and revenue-based
management, the MoWP was able to reduce transmission and distribution losses
by 0.8 percentage points to 17.9% in 2015-16 from 18.7% in 2014-2015. This was
also accompanied by improvement of the ratio of bills issued versus bills collected
in 2015-2016 to 94.6% compared to 83.2% in 2014-2015, attributed to the introduction
of billing systems through mobile meter reading introduced by the DISCOs in
2015.
PILDAT in its report observed that sustained
solutions to tackle the energy crisis in Pakistan would need more than just
low international oil prices. Structural reforms, simultaneous investment in
transmission and distribution infrastructure, measures to improve governance
and instituting transparency in metering systems will have to be adopted.
PILDAT’s Assessment of the Performance
of the Ministry of Water and Power in the Third Year of the Federal Government
June 5, 2014- June 4, 2016 is part of PILDAT’s annual assessment of performance
of key State Institutions. The complete report can be accessed here:
Assessment of Performance of Ministry of Water and Power Third Year of the Federal
Government, June 5, 2015- June 4, 2016.