Powerful lobbies out to thwart power sector reforms

Khalid Mustafa
ISLAMABAD: According to a latest study on the gray areas of the power sector, annual losses suffered by power generation companies (Gencos) and power distribution companies (Discos) because of mismanagement and failure to recover dues have swelled to an alarming Rs188 billion.

This means losses suffered on account of mismanagement and line losses exceed circular debt, which currently stands at Rs150 billion. The country can be rid of the circular debt if these leakages are plugged. But powerful lobbies supported by political elements are working diligently to thwart power sector reforms in order to continue swindling Rs188 billion each year. In documents available with The News, Pepco’s average collection is shown to be 80 paisas to a rupee, which means 20 percent revenue is not being collected. Informed sources in the power sector say influential lobbies want to continue to benefit from high losses, mismanagement and inefficiency, and are thus opposing power sector reforms.

According to the latest study of USAID, furnace oil worth $300 million (Rs25.5b) gets stolen on its way from Karachi to public sector power generation plants. Some top officials of Gencos and PSO and a few towering political figures are involved in this swindling.

“The nefarious forces mix water to compensate for the stolen fuel and the power plants thus use the adulterated fuel which results in huge inefficiency,” the document says. It also reveals that while actual line losses stand at 27 percent, the CEOs of power distribution companies with the connivance of Pepco top officials are showing donor agencies that line losses are 20 percent, which is incorrect. The system is sustaining Rs90 billion losses per year.

Moreover, the government suffers a loss of Rs14 billion when it is made to import refined petroleum products instead of crude oil because of under utilisation of the refineries. Under power sector reforms, as agreed with IMF, the World Bank and ADB, financial, operational and technical audits were completed which showed that the power sector is sustaining a loss of over Rs188 billion per annum and if this is controlled, there will be no need to increase the power tariff. In three and a half years, power tariff has gone up by almost 100 percent.

Under the proposed reforms, the board of directors of the Discos have been notified, and have started functioning, but influential lobbies still continue to prevail. According to Pepco officials some powerful people in the Ministry of Water and Power are also critical of the power sector reforms and agree that the BoDs of Discos should have financial stakes.

The official said that Pepco, which is to be disbanded by June 30, 2011 under a reform plan, is also resisting reforms, as it wants to have control over financial matters. Secretary power Javed Iqbal, however, believes that Pepco will be dissolved as per schedule.

The documents also highlight that public sector Gencos are running at 25-30 percent generation capacity while independent power producers (IPPs) are functioning at 45 percent of generation capacity. “The annual loss in providing fuel to inefficient plants is estimated at Rs40 billion,” the document said.