Energy and development
The newly elected government measured upto taking one extremely hard decision within a week of assuming executive power, the raising of fuel prices. No politician could be unaware of the inflationary reaction in the market and the possible resultant anger in the streets. For the elite it may hardly bring down the average lifestyle a peg or two, this unavoidable cruelty has deeply accentuated the economic misery of our masses. How best the effects on the common man may be mitigated is an acid test of the new Government’s functioning ability.
Employment opportunities can be generated by the setting up of new industries, matched by the mobilisation of domestic financial resources. In the face of the Gulf Crisis, we have an urgent necessity for developing indigenous energy resources, electricity becoming particularly important. An economic boom can only happen on a strong foundation of uninterrupted supply of energy, whether from hydel or thermal power is immaterial as long as the import bill does not add up. Pakistan’s oil exploration has generally gathered steady momentum over the years, almost 25% of our present petroleum needs are met through domestic production, efforts must continue relentlessly to increase local quantities. The domestic private sector must be encouraged to invest in oil exploration and production thereof, the public sector is no match for the private sector in the area of enterprise and management as well as mobilising financial resources.
We have limited known reserves of oil and low grade coal, however we have vast reserves of gas and hydel power which can be increased. Of special interest is the gas of low heating value which is not otherwise commercially viable. We must continue efforts for domestic development of nuclear energy despite the denying of nuclear technology to us, it being the cheapest form of energy after hydel power. WAPDA has done a reasonable job in the circumstances over the years, particularly in developing/sourcing of cheap hydel power but with Kalabagh Dam becoming politically a controversial project, our options are getting limited. Modelled on the Tenessee Valley Authority (TVA), WAPDA has distributed its available the power reasonably equitably and maintained the existing power stations/distribution grid. This was the correct modus operandi during the early years of Pakistan’s existence. Every monolith eventually develops its own problems and WAPDA is no exception, continued centralization has affected efficiency, no energy utility can afford to be inefficient. We must seriously consider dismantling WAPDA to manageable commercially feasible proportions. One suggestion would be to (1) constitute a Power Development Board (PDB) whose prime task would be to resource new electrical energy by various means in (a) the public sector while encouraging energy development in (b) the private sector by coordination of the Electrical Power produced and helping them in overcoming bureaucratic obstacles. The PDB’s mandate would stop at development on turn-key basis. The completed power station should be handed over to a (2) Power Generation Board (PGB) which will manage and run the power stations in the public sector (or sell it to the private sector) and control the distribution of electrical energy on an “as required” basis. Every Province must have (3) Provincial Electricity Distribution Companies (PEDCs) whose job will be to (a) manage the electricity distribution, (b) develop new sectors/grids on an “as required” basis and (c) maintain the existing infrastructure. The PEDCs can further decentralise to public/private sector municipal utilities wherever possible, with priority given to private sector which will be much more efficient in (1) distribution of energy (2) billing for the correct amount and (3) collection of bills thereof. Karachi Electric Supply Corporation (KESC) is a case in point where a public utility was dynamic till it was also brought under the aegis of WAPDA, the disadvantages of centralisation far outweighing the advantages of decentralisation. KESC should be taken out from under WAPDA and restructured as (1) Karachi Power Generation Corporation (KPGC) and (2) Karachi Electricity Distribution Corporation (KEDC). The two companies may further be privatised by selling off shares to the public to mobilise private sector investment in the crucial energy sector for Karachi, the port city constituting the economic lifeline of the nation. The decentralization of the public sector into profit making public and/or private sector constituent units should be a high priority, KESC is a symbolic but pragmatic reference point from where to begin.
The financial strength and the expertise of the private sector was first encouraged during former PM Junejo’s government, the sincere political intention was continued during the Benazir rule. With the help of US AID, a Private Power Cell (PPC) was set up in the Federal Ministry of Water and Power. Experts from USA were inducted as Consultants to the PPC, a couple of senior technical executives were posted from WAPDA or locally hired.
In theory, the PPC was an excellent idea, representative of the political will, it has been a near total failure in practice. Rather than encourage private sector foreign investment in energy, the incumbent bureaucrats (and so-called technocrats) have made it the biggest roadblock to the involvement of private sector in energy. The PPC had a bad midwife in the shape of Mr Akram Khan, once Member WAPDA, who became Advisor to the Ministry of Water and Power with the rank of Additional Secretary. A better than average technocrat when he was in WAPDA, Mr Akram Khan was on record, when in WAPDA, against this privatisation concept, having once said (it is believed) that the private sector would come into the energy sector over his dead body. His record showed that he failed to change his stripes till his eventual retirement in Oct 89. A WAPDA employee, who had been a heart patient for over a decade, was chosen to head the dynamic rigours of the PPC, WAPDA probably wanted to sideline this gentleman for a few years. Fundamentally opposed to the concept of private sector’s imminent entry, WAPDA thus accomplished two birds with one stone. The other day Sir Geoffrey Howe described Mrs Thatcher as a Team Captain whose opening batsmen discover on receiving the first ball that their captain had sent them in to bat with broken bats. That about describes it! The appointment of Mr Daud Beg, formerly chief aide to the PPP’s Federal Minister for Parliamentary Affairs, as replacement of Mr Akram Khan did not change things. This gentleman simply joined the company of those members of the administration who usually stretch the truth to suit the paperwork, a look-busy do-nothing attitude that is catastrophic in the energy sector.
The whole emphasis of the PPC has been how to promote (and simultaneously milk) the Hub River Xenel Project, an enduring white elephant that despite its hobbled status continues to be funded (adding prodigiously to our debt liability). Even the US Embassy in Pakistan has requested that this GIFT HORSE be shelved for some years in view of the oil crunch. How a project, totally based on imported oil, could ever be economically feasible, oil crunch or not, is open to question.
The PPC’s technocrats have so totally failed in their job (to the detriment of the economy of Pakistan) that the US-based President of the US Pakistan Economic Council Inc, USA in exasperation at their attitude, has recently written to PM Nawaz Sharif stating that with such bureaucrats around in the crucial energy sector any effort to induct private foreign investment in Pakistan would be counter-productive. In short order, we must (1) induct our best technocrats into the Ministry of Water and Power and the PPC (2) increase the number of personnel in PPC (3) immediately invite private sector bids for a crash programme of Combined Cycle Gas Units based on low heating value gas (of which plentiful supply is available) (4) invite private sector against a given and realistic tariff, the formula weighted against agreed and internationally acceptable parameters which must be thoroughly examined by (5) NDFC’s Private Energy Division composed of technical and financial expertise, any sanction of projects supported by a bank guarantee by the investors attesting implementation of the project during an agreed (shortest possible) time-frame and (6) lay emphasis on the importance of private sector induction in the energy sector by making PPC a part of the BoI in the PM’s Secretariat. Given a reasonable tariff and feasible tariff openers, full freedom should be given to the private sector to bring in the project to fruition financially and technically without depending upon the PPC’s “standards”, it does not take imagination to know what that is. A study of official foreign tours and accomplishment thereof should make interesting reading.
Our biggest handicap to fostering industrial development is thus the present Energy-Trap that we find ourselves in, the main blame can be laid on the third and fourth rate human potential that we have had to depend on. Systems do not make people, people invent systems and run them. This country’s future has been mortgaged by the shenanigans of petty officials, those who are not averse to grossly misrepresenting facts and/or colouring the truth at their leisure, these people survive on putting up distorted SUMMARIES to justify themselves to whoever is in power, be it Ms Benazir, Jatoi or Nawaz Sharif. Let the PM get the finest human material to deal with the energy crunch or all this country’s aspirations for economic emancipation will be frustrated.
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