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Political Economy of Electricity Reforms

Case Study of Pakistan

Introductiono Historical Contexto Agricultural, Industrial and Domestic Demand

Electricity Supply System in Pakistano Sources of Electricity Generationo Generation, Transmission and Distribution Agencieso Electricity Losso Financial Status

Political Economy of Electricity in Pakistano Political Environmento Tariff Adjustmento Multiple Pricing and Subsidizationo Electricity Reforms

Conclusion

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Introduction:

Pakistans electricity sector grew rapidly after the construction of two monstrous dams of

Tarbela and Mangla. During 1970s era Pakistan was one of the leading country generating

500kv of electricity in the world. Pakistans power supply policy brought positive results as

WAPDA became the most progressive and profitable public department of Pakistan but

unfortunately in 1996; PPP government announced new Power Supply Policy with the

introduction of Private firms to produce and invest in energy sector. This dis-integration

unfortunately proved to be the destruction of a well set department due to high tariffs and cost.

In 1998 when Muslim League (N) came to power and it was anticipated that they will earn good

reputation back to WAPDA instead they presented a reason for the role military officers in

WAPDA, nonetheless the problem tree was just planted which produced nothing but

complications as expected.

During last decade we saw development in almost every sector except energy sector where

average demand of whole Pakistan grew upto 9% a year without generating a single unit surplus;

thanks to dictatorship. Now in present Pakistans installed capacity is around 3600 MW while we

are generating only 2000 MW exactly equal to the demand of electricity then why the crisis lets

find out.

Electricity Supply System in Pakistan

Since the Power Policy of 1996, Pakistans sources comprise both public and private that include

thermal, hydral, wind,solar. IPPs and Rental power generation while every unit of electricity is

transmitted through WAPDA and is distributed by PEPCO.

Talking about electricity loss, In Pakistan the 2nd

biggest reason of crisis is line losses which

mainly are due to electricity theft and due to circular debt of many government departments to

WAPDA. Both kinds are the sufferer of politics in Pakistan that has generated a gigantic gap

between supply and demand.

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Electricity theft is largely done by politically supported personnel and industrial groups by which

a very large amount of electricity go wasted unpaid and its not just the matter of one day or

more, it has been a common practice of decades which is locally known as Kunda System.

Circular Debt is the product of increase in oil prices in the year 2007 when Government of

Pakistan could not afford to pay the market price in cash and purchased oil on credit base which

is continuously increasing; now the problem is that IPPs are asking for their money but our

govt. is way back to their regular schedule of payment which has resulted in the broken supply of

electricity. As the govt. pays them we examine no shortfall of electricity. So, its all about the

financial status of our govt. which accordingly is very week.

Political Economy of Electricity in Pakistan

The situation and involvement of politics in energy sector in Pakistan is not much different than

of Gujrat in India. Interest group politics is the main reason of less generation of electricity as no

developmental project could stand upon its feet in Pakistan e.g Kala Bagh Dam Project which

has the ultimate potential of 50,000 MW electricity generation and the unit cost of electricity

generated fron Kala Bagh is expected to be Rs.1 but has been the victim of politics since 1970

and finally was turned down by PPP govt. Thar Coal Project which could be the biggest energy

generation source and might have changed the future of our homeland is also facing the brutality

of politics as the funds for the project have recently been stopped by Chairman OGDC Adnan

Khawaja (who barely knows of energy generation) blaming this project as useless while the

Engineer in command Dr. Samar Mubarak is still hopping trillion tons of electricity fron thar

project.

Political inefficiency has recently been imposed on consumers in the form of tariff adjustment

which specifically is used as fuel adjustment tax in Pakistan. This shows the inefficiency of

governance that could not manage its tariffs last year and has produced a huge gap between cost

and revenue.

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In fact this cost and revenue gap heavilly depends upon the political policies of our current govt.

who opted for Rental Power Plants to meet up their electricty demands which is considered as

the most expensive and last preference of any rational govt in the whole world. Unfortunately

when this point was raised by media to our Prime Minister Mr. Yusuf Gillani; he answered

whatever we did was PPPs policy. The unit cost of rental power is estimated to be Rs. 14 in

Pakistan while we can generate more at Rs.1 unit cost. So, its just the interest group politics that

caused so much damage and fled Pakistan to circular debt.

In Pakistan politics is so much influential that our govt. willingly pay Rs.70 billion to Rental

Power Plants for limited span of electricity supply but Chairman OGDC refused to grant only Rs.

7 billion for Thar Coal Project. The best example of governance in Pakistan is that govt.

purchase elecctricity from private firms at Rs. 14 plus per unit while supply them back at Rs. 4

per unit as subsidized rate. These are some shocking facts of efficiency and rationality of our

govt.

In Pakistan it has become a common custom that no developmental project ended up within their

expected date of accomplishment and the reason political involvement, commission based

working environment leads to bankruptcy and corruption as Neelum Dam was to complete in

2014 and Dia Mirbhasha in 2017 but till now no development is done that could ease the burden

of electricity crisis in Pakistan.

The ultimate hope that can straighten things up is Electricity Reforms which are quite similar to

India including many other factors too.

I. Steps should be taken to reduce electricity theft which will help earning huge revenue.II. Administrative expenditures should be manage to minimum.

III. Circular Debts should be restructured and be avoided at any cost which will help savingthe interest paid upon debts.

IV. Rational decision making is required and interest group politics must be kept away fromelectricity dapartment.

V. Power purchase agreements should be renwed and subsidization to power suppliersshould be avoided.

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VI. New Developmental Projects must be started on priority basis considering the futureenergy needs of the country.

VII. Infrastructure must be upgraded to ease out the load of transmission and distribution ofelectricity which eventually will help reducing line losses.

VIII. Military and Politics has ruined the efficiency of WAPDA due unskilled administrativerule, so, it should be prefered that technical hands must be brought in front to do their job

instead of gooves working for destruction.

IX. A very professional and honest corporate working environment is needed instead of acorrupt and commision based working.

Conclusion

If we start working on these reforms then hopefully we will regain our status in the world

whether its related to industrial growth or agricultural growth.