Pulling Pakistan's Power Sector Out Of The Quagmire

Poor governance is the root cause behind the present mess in the power sector. Changing it around, however, will not be easy because part of it lies in the structural arrangement and part in the managerial approaches

Pulling Pakistan's Power Sector Out Of The Quagmire

Whenever a new government takes charge in Pakistan, it starts by reinventing the wheel on what it believes are dysfunctional sectors. Professing new (or renewed in the case of second-time elected) zeal and vows to revolutionise the country within days and months rather than years. High intents aimed at cornering the electorate are invariably coupled with even idyllic-sounding slogans and phrases such as "Turnaround Pakistan", "Make it the Asian Tiger", a "jobs paradise for foreigners", and the list goes on. Taskforces are formed overnight to work on "war footing" and "fast-track", mostly comprising the same old hands, hoping they will somehow discover the "treasure" their eyes had missed previously. 

Our history shows that we continue to move in circles. Nowhere is this more evident than in the power sector, which is in the throes of these oft-repeated quick fixes, albeit with a new zest. The frequent tariff increases, however, tell a different story altogether. In simple words, the power sector's descent into bankruptcy continues. Our leaders must heed advice from the ancient Chinese sage, Confucius: "When it is obvious that the goals cannot be reached, don't adjust the goals, adjust the action steps." 

Pakistan's power sector is undoubtedly in a quagmire. Its circular-debt has crossed the Rs2.7 trillion mark and shows no sign of relenting. The National Electric Power Regulatory Authority (NEPRA), in its State of Industry Report 2023, observes that this sector is causing huge financial losses to the country which exceeded Rs530 billion last year. Around 75% of these losses were caused by heavy system losses and lack of full revenue recovery. In NEPRA's words: "The primary driver of the power sector's stress is poor governance, spanning from planning to execution and subsequent operation, coupled with lack of accountability." 

Sharing his frustration (in a national daily) for not being able to make any headway, Khurram Dastgir-Khan (KDK), the power minister in the previous coalition government, laments, "Pakistanis demand cheap and plentiful electricity – everywhere all at once – and it is nowhere in sight." He also offers some suggestions for the new government, the most important of which is to "conduct massive reforms in the power sector including the Power Division". 

There seems to be consensus (at least amongst NEPRA, the former power minister, and this writer) that "poor governance" is the root cause behind the present mess in the power sector. Changing it around, however, will not be easy because part of it lies in the structural arrangement and partly in the managerial approaches, both deeply entrenched and solidified. But it is a "must-do" surgery for the government if it hopes to perform and if it seriously wants to save this sector and, with it, our economy.

The main barrier to Pakistan's transition to a sustainable energy future is the mindset of the high priests in the federal bureaucracy and the managers of the entities downstream. The former are adamant about keeping tight control over the power sector come what may; the latter still considers consumers captive to their grid and for central-station generation to be the only way to serve them. Their deep and extended association with fossil fuels, perhaps, has fossilised their minds also.

The world, meanwhile, has gone topsy-turvy, shaking up the very foundation of the energy business. It is on course to eliminate its dependence on fossil fuels by switching to electricity derived from renewable and sustainable resources. Multiple options now exist, both on the supply and demand sides. Small and distributed generation technologies have become competitive, and consumers have other options to control and serve their demands.

These alternatives offer many advantages to the country as well. Their use can reduce capital and operating costs by reducing generation reserves, transmission and distribution (T&D) losses, and minimise T&D needs. Their small, distributed, and labour-intensive nature makes them preferrable and a means to spur industrial growth and employment. They also enhance the diversity, sustainability, and security of the grid and other infrastructures. 

Pakistan's energy sector entities and their managers, however, remain stuck in history. Consequently, the present setup has become anachronous and dysfunctional. It's divided into compartments that function mostly in silos, lacking the cohesion, harmony, and coordination essential for handling the new challenges.

Effective handling of new challenges demands close coordination among energy sector entities, not just in letter but also in spirit. For example, fuel and power sectors were brought under the new Ministry of Energy to improve coordination. Both remain separate without any noteworthy mutual coordination. Each is headed by a separate minister, whereas a single minister should lead the energy sector.

As the environment around them changes, organisations must adjust, realign, and reposition to remain profitable. Monolithic and bureaucratic organisations with multiple vertical hierarchies and centralised managerial control are not viable anymore because they impede flexibility and adaptability. Smaller organisations with fewer and lateral hierarchies are far more capable of creativity, innovation, and agility.
We need a setup that can steer the country through turbulent times via a vision-led, holistic, and unified effort. The plethora of existing entities and functions, within and without the ministry, have lost their rationale. The situation seems ripe for establishing a new entity in the energy sector that has the requisite attributes.

This new entity (let's call it generically, "National Energy Commission") should be carved out of the existing entities after trimming and reorganising their roles and functions afresh. This commission should be entrusted with the responsibility of strategy development, policy formulation, devising legal, regulatory, and financial frameworks, and other issues with a holistic vision and from a single platform. 

The new entity should take guidance from the ministry on strategic priorities and liaise with the Ministry of Planning and Development in setting a strategic energy agenda for the country and developing the most suitable strategic and five-year plans from the perspectives of security, affordability, and sustainability. It should also guide other energy sector activities and functions downstream using a soft, arm's length, and strictly non-interventionist approach.

Our leaders have a lot of catching up to do in the energy sector. Its existing setup is a classic example of having too many cooks in the kitchen. We need holistic thinking, integrated planning, and close coordination within this sector to deal with the vexing challenges of the constantly shifting global energy landscape. This makes recasting of the energy sector's institutions and their governance imperative. The sooner, the better.

The author is a freelance contributor interested in sustainable energy and power sector policy, planning, and development. He can be reached at: msrahim@hotmail.com