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| WB paints gloomy picture of Pakistan power sector |
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Wednesday, July 08, 2009
By Ansar Abbasi
ISLAMABAD: The World Bank presents an extremely gloomy picture of Pakistan’s power sector that is marred by corruption and inefficiency but sells electricity to the public for a price that is 60 per cent higher than that of India and 40 per cent more than that of Bangladesh.
A draft report on “Pakistan’s Investment Climate” issued in March this year by the World Bank reveals that Pakistan has become the worst performer in the world after Egypt in respect to the waiting period for a new connection. Regarding massive corruption in the provision of electricity connections, the report disclosed: “A stunning 84 per cent of firms that applied for connection had to make informal payments in order to obtain electricity services.”
The governmentís claims and the ever-increasing loadshedding apart, the Bank says with only about 65 per cent of Pakistan’s population having access to grid-connected electricity, poor access to power has assumed serious dimensions, justifying firm perceptions that electricity is the most important impediment to growth.
Instead of taking remedial measures and keeping its own house in order, the National Electric Power Regulatory Authority (Nepra) is poised to hit the consumers with another increase. The decision has, however, been put on hold following the Supreme Court’s intervention. The court seeks review of the decision, which, according to a source, the Nepra had taken without following the laid-down procedures for tariff determination.
The WB draft report presents a sorry picture of power sector reforms and the inadequacy of regulation in enforcing efficiency by the Nepra despite being in formal existence since 1997. The Nepra law required a regulatory framework of which 90 per cent has not been put in place by it despite the Nepra law stipulation to issue these rules within 18 months.
Some interesting portions of the World Bank report are reproduced as below:
Electricity price: The price of electricity is on the higher side relative to other South Asian countries. Even with the subsidies, system losses and supply quality problems, electricity tariffs in Pakistan are 60 per cent higher than in India and about 40 per cent higher than in Bangladesh.
Losses: Technical and collection losses impose a severe strain on the financial sustainability of Pakistan’s power sector. The country’s electricity system loses more power than all comparators, apart from India, which lost a quarter of its generated electricity in 2006/07.
Access to power: Access to power supply is a serious challenge for firms although the pattern differs across location, type and size.
Delays in getting electricity connections have become worse for firms and this barrier to entry and constraint on expansion. The waiting period for a new connection went up to from around 37 to 41 days from 1999-2002. The average waiting period in 2006 deteriorated to 92 days, placing Pakistan among the worst performers in the world, second only to Egypt amongst its comparators.
Corruption in the electricity sector: In addition to technical issues, other factors impede low-cost access to power supply. A stunning 84 per cent of the firms that applied for connection had to make informal payments in order to obtain electricity services — a startling increase from the 25 per cent firms that reported making such payments in 2002.
Certainly, among its comparators, these numbers are the worst for Pakistan. In cities like Lahore, Quetta and Hyderabad, almost every firm applying for a connection is reportedly asked to make an informal payment.
Supply interruptions: Firms facing unreliable power supply with frequent outages are disproportionately affected in different regions of Pakistan. The firms face significant interruptions in power supply, disproportionate to the available generation capacity. Outages are not just pervasive but almost universal, with 95 per cent of firms reporting power outages. In case of Pakistan, the total annual incidence of power outages comes to 945 hours, comparable to Bangladesh (1105 hours), which is the worst case among the comparator counties in both frequencies and number of outages.
Power interruption losses: Power interruptions cause severe financial losses for all Pakistani firms, and affect small firms and the textile sector the most. Outages, leading to forced downtime, waste of materials, damaged equipment, and added maintenance average 10 per cent of annual sales averaged over the entire manufacturing sector. This figure has almost doubled from the reported six per cent in 2002 and is, again, second only to Bangladesh among comparator countries.
The World Bank report recommends that the power sector needs to achieve financial sustainability to enable better maintenance and future expansion. The report recommends: “If uniform tariff is applied nationwide timely payments must be made to cover the difference between the determined and notified tariffs; and there has to be a substantial reduction in technical (transmission and distribution) and commercial (collection) losses which currently stand at a quarter of net generation due to overloaded, under-invested, and under-maintained networks”.
As against the WB’s report, the sources doubt Nepra’s tariff fixing skills and even its existence is questioned, as it has become an abode of retired government officers. These officers are being appointed on lucrative terms that were designed to attract professionals who had similar paid jobs elsewhere. Normal pay increases range from 50 to 100 per cent of last drawn salaries for these officers.
The chairman and members are reportedly paid perks and benefits of Rs 10 million each per year. The authority is also building a huge office complex worth Rs 500 million. It is surprising that such a huge investment is being made to house about 25 officers. The Nepra has reportedly an average five-member staff for every officer. These staff, from drivers to Qasids, are usually seen at duty at the residences of certain members.
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ISSN 1563-9479 
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