An inquiry report on the alleged irregularities in the power sector has revealed that due to circular debt and subsidies being given to independent power producers (IPPs), the national exchequer faced a loss of at least Rs4 trillion.
According to the 278-page report, which was prepared by a committee led by former Securities and Exchange Commission of Pakistan (SECP) chairman Muhammad Ali, the cumulative budgetary support for the power sector amounted to Rs3.2 trillion in subsidies and other liquidity injections from 2007 to 2019. But despite this, there were annual losses of Rs370 billion due to ‘power sector’s inefficiencies’, the report added.
“Power sector policies during the last two decades have allowed exorbitant profits to a select group of investors and encouraged de-industrialisation by incentivising higher capital allocation to a guaranteed and less risky power business,” the report stated.
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“During this time, inefficiencies in the public sector generation and distribution companies were unfortunately tolerated, including by the federal government and NEPRA [National Electric Power Regulatory Authority]. The reform towards the goal of the ultimate privatisation of ex-WAPDA [Water and Power Development Authority] distribution companies has been pending since more than two decades. These companies have been corporatized with independent boards of directors, yet operationally this entire distribution sector worth Rs1,400 billion is being managed by the federal government,” it added.
The report pointed out that Pakistanis had been getting the most expensive electricity in the entire region, which could be due to some private companies providing false oil statistics to secure better tariffs.
It also stated in accordance with the power policy of 1994, 15 private power producing companies invested around Rs60 billion and earned over Rs400 billion and paid 22 times the profit to their business partners.
“Today, the country’s domestic and international debt levels have reached the point of unsustainability because of which power sector issues require even more urgent redressal. If we do not act soon, we risk economic chaos. Unfortunately, none of the problems have easy solutions. Most require disruptions and losses to certain stakeholders in the short-term if we want to achieve gains in the long-term for all stakeholders. Though it is obvious from this analysis that various mistakes were committed which are part of a natural learning process for policymakers exploring structural changes, it is also obvious that the system and processes were manipulated to the benefit of a select few,” the report stated.
