Islamabad: A private think tank on Tuesday expressed concern over inability of the government to address power crisis for the last two years and advised it to divert funds from roads to energy to end a roadblock affecting nearly 5 per cent of economic growth.
The Institute for Policy Reforms (IPR), led by former finance and commerce ministers Dr Hafiz Pasha and Humayun Akhtar Khan, said in a detailed report that the government should focus on early completion of ongoing hydro and thermal power projects to increase generation.
It said the government did not have a concerted plan to address the power crisis and its policy response was focused only on increasing installed capacity instead of removing past mistakes which have brought the sector to this stage.
It said the gaps still existed in policy and governance. Decision-makers did know most factors behind the power crisis, but they have been unable to address them. Even in their priority area of increasing generation, it was not clear where the government was going. For example, the government has moved between coal, liquefied natural gas (LNG) and solar power to address the issue.
Increasing capacity will not work without addressing issues endemic to the sector, the IPR said. Foremost among the many issues that affect the power sector was its inability to recover cost of delivery of power, it said. It explained that the distribution companies were losing about 30pc gross revenue. This meant a shortfall in liquidity, leaving no space for capital formation. The build-up of receivables limits power generation and it was not possible to improve the sector with such high losses.
The report criticised the previous policy of relying on imported fuel, leading to high energy cost, and blamed 1994 power policy which it said gave liberal incentives and paid no importance to having an efficient fuel mix. “Oil price have increased by 20 to 30 times since then,” it added.
Criticising the persistence of past practices, the think tank said that as late as last week the government agreed on upfront tariff for LNG, which did not come through a competitive process. The government has also not released information on details of the coal and LNG arrangements, it said, calling for transparency in this regard.
It said the build-up of circular debt continued to clog the energy supply chain and the government had no declared plan to do away with circular debt. “The tariff and subsidy policy needs to be reformed where Nepra (National Electric Power Regulatory Authority) must have a greater say,” it added.
To settle the issue of circular debt, the government should take administrative measures to reduce line losses and under recovery of bills, the IPR said. The government should also reduce tariff slabs and have criteria for disconnection of supply.
It also suggested that the government must increase gas allocation to the power sector for reduced tariff and reforming the tariff and subsidy policy.
Despite present decline in energy prices, focus should be on indigenisation through expanding hydropower, developing a plan for Thar resources and exploring shale potential, and increase solar and wind generation.
The government should also create a dedicated window for financing of private power and create a private energy support fund with Rs157 billion with the Special Development Fund (from Saudi Arabia) as seed.