Speaking at a news conference, Information Minister Fawad Chaudhry said that Pakistan Tehrik Insaf government has decided to carry out an audit of all power plants set up during the last fiver years of PML-N government, not saying a single word about the shady deals made for setting up furnace oil and diesel fired thermal power plants in the PPP government during 1994-1996. He also did not refer to the reasons of massive default of electricity bills made by the influential political and business elite federal government departments and provincial governments. The cumulative receivables of power sector on this account are well over Rs. 870 billion three-fourth of the amount of circular debt. Putting the entire blame of not observing transparency in thermal power plants agreements on the last PML-N government is a debatable issue.
Justifying the expected decision to increase electricity tariff, Information Minister said the government is facing a daily loss of 1.2 billion by providing subsidy on electricity to the people, adding, that this practice could not be continued for long. “We have not so far taken decision regarding increase in power tariff, but we will have to take this step and we will make every effort to save the poor from facing the brunt,” the minister declared. Saving the poor from the brunt of high electricity price is a strange logic as people of bottom and lower middle class are facing load shedding of longer duration and pay highly inflated bills. Further rise in electricity tariff would add to their woes.
A lopsided power generation policy had been implemented by the elected governments of PPP and PML-N. The clauses in the power purchase agreements with both foreign and local companies about tariff, capacity charges, mark up on loans and purchase of fuel by the PSO were loaded against the national interest. It is the capacity clause envisaging payment on idle capacity of power plants, if federal government fails to provide fuel to private power producers that adds billions of rupees to the hydra headed monster of circular debt. The capacity charges are paid by the government which is not produced and consumed. The electricity load shedding of four hours in cities and 18 hours in rural areas despite the increase of 10600 megawatt in generation capacity reflects that additional power production is not reaching the transmission and distribution system.
The PML-N government made agreements with Chinese power producing companies for coal based thermal and hydel power generation which were not transparent. Capital expenditure (Capex) for coal projects was about 40 percent higher than the international cost and the agreed coal power tariff was 8.4 cent per unit as compared to a tariff in many jurisdictions of five cents and below. In the meantime more evidence has emerged against irrational coal tariff that Chinese power producing companies will charge and for the payment of which the previous government has agreed to create a revolving fund in the banking system to make payment of the electricity either produced or not by thermal power plants of Bhakki, Haweli Bhadar Shah and Sahiwal.
The story does not end on coal based thermal power plants alone. The hydropower projects which are being completed by Chinese under CPEC will alarmingly raise the power tariff in future. A comparative data of different projects shows that per unit cost varies widely. Karot has 2.03 times more than the World Bank financed Dasu hydropower project., Kohala 3.31 times; Azad Pattan 3.97 times; Sukki Kinari 2.38 times; and Mahal 2.50 times more as opposed to the Capes and tariff of Dasu. It shows how merciless the political leadership is to the country and its people.
Power sector seems to be a sinking ship and may turn out a “Titanic” if urgent and drastic reforms are not implemented for lowering electricity tariff. A more vigilant oversight of EPC bidding process has to be introduced. It cannot be left to the discretion of the sponsors because cost and the penalty are passed on to the consumers under cost plus tariff. Breaking the EPC into a number of components and inviting separate bids for them in future hydropower projects will be in order. The focus should shift now on more competitive power generation projects like solar, wind, hydel and solar-wind hybrid. The canon of post audit of power projects should not remain confined to the ones implemented in the PML-N previous government but it should also encompass the IPPs that were built in the decade of 90s and a team of legal experts should be constituted to find a way out for renegotiating the power purchase agreements made with private power producing companies.