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Experts stress de-politicising energy sector for economic progress

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The real challenge remains that the political economy of Pakistan continues to create hurdles in shaping up the country

LAHORE: The energy sector should be de-politicised and people having conflict of interests should not be appointed in any of the key posts in the sector. This will helpful for ending the incompetency, nepotism and favoritism from the energy sector and leads to proper development of the sector.

These views were expressed by the energy sector experts responding to the questions speaking at a webinar at Lahore Chamber of Commerce and Industry (LCCI) here on Thursday.

The energy sector experts including Senior Research Economist Pakistan Institute of Development Economics (PIDE) Afia Malik, Energy Specialist of Sustainable Development Policy Institute (SDPI) Dr Hina Aslam and Energy Research Center COMSATS Dr Iftikhar Ahmed suggested that the energy policy should be made focusing towards available local indigenous resources instead of import base fuels such as RLNG and imported coals which resulted in increase in import bill and high cost of the energy. Additionally, import base energy generation also needed to be reviewed monthly basis and create distortions and instability for the sector.

Responding to questions about the culture of nepotism and non-merit based appointments in the power sector, referring to for instance recent appointment of the Special Advisor to the Prime Minister, Tabish Gauhar, and his broadly discussed idea of public-private partnership model to reform ailing DISCOS in Pakistan, which is being discussed as the model he tried to adopt but did not work in Nigeria during his stint as the Chief Executive Officer of the Oasis Energy, the experts stressed upon the need for appointments following a meritorious process bringing forward true experts in all positions who not only have a long standing scientific knowledge of the sector, but also have conflict free long term vision of bringing timely reforms.

The real challenge remains that the political economy of Pakistan continues to create hurdles in shaping up the country. While admitting to the fact that Pakistan has broad capacity related issues, one of the experts agreed that vis-à-vis Nigeria, there are successful models available from other related economies that the government should consider for adopting while keeping in mind the country’s own needs. The question also remains on strong deep down structural reforms to deal with emerging challenges, they added.

“We have to completely depoliticise the power sector at first stage, and no appointments should be made based on political connections”, the experts said. Professionals should first be appointed for such roles and then they should also be made accountable for their actions. There should be more broad based collaboration between various stakeholders and then (right) decisions should be taken, they further suggested.

The decision making in power sector should be given to professionals by removing it from people in only power sector because conflict of interest arises. Such as in case of DISCOS, bureaucrats not only take decisions to run them, but make own policies, while do accountability of their own actions at the same time. If we are heading to form a more liberated and open market model in the power sector, then the Central Power Purchase Agency should be an independent company – and not be headed by a bureaucrat, the experts suggested.

Afia Malik pointed out that Pakistan’s energy history was full of episodes of ‘stop-go’ growth driven by energy shortages and excessive costs. Many a times Pakistan experienced gap between the demand for, and the supply of, energy bringing economic progress to a standstill. Pakistan’s electricity sector is in complete mess. It suffers from institutional and structural disconnections and fragmentation in the priority of issues, she pointed out.

She said cumulated losses of more than Rs 5 trillion and now known as circular debt is rising non-stop; and reached an all-time high of Rs. 2.4 trillion. Out of these 2.4 trillion, more than Rs 1 trillion is parked in Power Holding Private Limited (PHPL). Further, the government borrowing for energy sector crowds out private borrowing which is not now not available for productive activities. She opined that the low recovery ratio of DISCOs was adding further to circular debt. In tariff determination, NEPRA counts 100 percent recovery.  However, the actually reported recovery percentage of DISCOs remained around 90 percent in fiscal year 2019.

Dr Hina Aslam was of the view that amongst all the continued challenges of energy and power sector of Pakistan, Covid-19 has plagued its crippling impact on the country’s economy in the year 2020. The country couldn’t capitalize on crashed gas and oil prices, along with disrupted supply chains, putting consumers to face the worst oil crisis. Loss of revenues from upstream, midstream and downstream activities occurred due to many losses. Reduced recovery bills from electricity consumers, subsidies payment, and thin demand led to a major dip in the electricity and power sector. This along with mismanagement and governance issues led to impair the LNG imports, putting a lot of burden on Pakistan’s economy facing an increase of circular debt reaching to Rs2.4 trillion in 2020.

With these added impacts, the way forward for the government needs strict reforms, institutional coordination and strengthening and overcoming bureaucratic and political hurdles in the process. She suggested that an evidence based planning based on real data should be ensured and the major stakeholders such as National Transmission and Despatch Company (NTDCL), The National Energy Efficiency & Conservation Authority (NEECA) Alternative Energy Development Board (AEDB) as well as all relevant research groups from academia must be coerced into a research consortium for producing reliable forecasts in all sectors.

Dr Iftikhar Ahmed said that in all developed countries a broad based debate held which does not unfortunately happen in Pakistan on the energy sector. It begins with a local resource analysis, then it is decided how run the same keeping in mind local socio-cultural practices. However, in Pakistan the most of the models are adopted due to various motives. Such models therefore do not become successful. In such a sensitive sector, the government should avoid short terms and temporary appointments of such people who continue to serve in various positions at the same time while in the decision making critical roles in the government, and who mostly do not understand deep rooted sectoral issues, he observed.

He stressed that need of decentralizing the power sector properly.  The successful countries, like the United Arab Emirates which is a tribal society much like Pakistan, have also decentralized the sector, and then adopted a strong governance models over and above. Everyone agrees that our Distribution System is rotten and obsolete now, he added.

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