Rural Consumers bear greater burden of electricity load shedding in 2015-2016: PILDAT Assessment of Performance of the Ministry of Water and Power

  • Mixed progress on eliminating power outages

  • MoWP unable to achieve its target for increasing

    generation capacity for 2015-2016

    Advertisement

  • Privatization of Distribution Companies (DISCOs)

    rolled back amid political opposition

  • Decrease in transmission losses and increased

    recovery of bills in 2015-2016

  • 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.