Pakistan’s electricity market faces dual, and paradoxical, challenges: on one hand, the circular debt is spiraling out again, thus denying the producers a fair and reliable return on their investment; and on the other hand, consumers have hardly any reliable access to electricity even if rising tariffs are ignored. To address this complex issue, PRIME, a think tank, organised a conference on “Power Sector Reforms: State Incentives or Market Rules”, which was addressed by a range of speakers from the public and private sectors.
The conference stressed on better economic regulations, empowerment of energy consumers, resolution of circular debt, privatization and market friendly policies in GENCOs and DISCOs, and good governance and independence of DISCOs.
Terming NEPRA as the linchpin of power crisis, a former member Zafar Ali Khan said NEPRA should act as an economic regulator, and not merely as a price settling agency. An independent, effective and efficient regulator is required to look after the interest of consumers, power companies and potential investors, a role which NEPRA has failed to perform over decades, Khan said.
As a representative of the private sector, Kashif Mateen Ansari, stressed on ‘democratization of energy’ by allowing the consumers, through regulatory reforms, to also produce power on their own, and sell it back to DISCOs in what is called net metering.
Contributing in the debate, a former official of the Ministry of Finance, who had closely worked on circular debt, Naveed Iftikhar, recommended full cost recovery of electricity from all consumers while ensuring protection of life line consumers through tariff bounds.
Chairing the first panel on policy and regulatory framework, Abdullah Yusuf, the former FBR head and now the Chairman of IPPs Advisory Council termed circular debt as largely as governance issue. He also recommended to privatise all GENCOs and DISCOs. The DISCOs are now widely believed to be the major problem in the electricity value chain. While reviewing Karachi Electric, IESCO and PESCO; PRIME Adjunct Scholar Dr. Raza Ullah attributed the improved performance of K-Electric to its privatization and termed the new governance and management as key factor for reforms.
On this occasion, Adnan Rizwi, Director K-Electric and CFO of Faisalabad Electricity Supply Company also spoke. Participating in the discussion, the former chairman of IESCO, Mohsin Khalid termed independence of DISCOs as an incomplete job despite having achieved a notional autonomy.
Concluding this panel discussion, the former MD PEPCO, Tahir Basharat Cheema criticized the externally driven power reform agenda and stressed on the need of indigenous reforms. Cheema held the unbundling and corporatization of WAPDA unsuccessful and suggested that the power policy should be led by dual goals of full supply and affordable rates. He also pointed out to the political economy of managerial and supervisory level appointments and termed it as a rent seeking process.
On this occasion, PRIME also released its study “Building on Privatisation: A Review of Electricity Utility Companies in Pakistan”, authored by Dr. Raza Ullah. This study concludes that KE is performing exceptionally well in comparison to the two state owned companies PESCO and IESCO due to the decline in transmission and distribution losses, profitability and leaner organization with adoption of newer technology in power sector in its post-privatization phase particularly under the current management.
While presenting key policy messages, PRIME Executive Director said the liberalisation of the power sector is far from complete, which is conditioned with introduction and enforcement of market rules. Instead of following the conventional equating private sector with market, the presence of market rules more important, even if the government continues to be present as an active player, Ali Salman said.
Policy Research Institute of Market Economy (PRIME) is a public policy think tank based in Islamabad working for an open, free and prosperous Pakistan by creating and expanding a constituency for protective function of the state and freedom of the market. It conducts research on important economic policy issues and advocates policy solutions informed on market principles. This conference was organised with the support from Friedrich Naumann Foundation for Freedom and the Atlas Network.