MQM-P flays Sindh govt for appointing ‘non-local officers’ as city administrators
KARACHI: The prolonged power outages in Pakistan are deeply rooted in the poor state of governance, particularly at the hands of distribution companies supplying electricity to end-consumers, and ill-planned growth in surplus supplies and stagnant demand.
The poor governance – like low recovery of monthly bills and high power theft – has given birth to the complicated ‘circular debt’. This has continued to compromise working capital at power production, transmission, distributions and oil and gas supplying firms.
Moreover, the non-stop addition of new production plants despite stagnant demand for years has continued to inflate ‘capacity payment’ to the standby plants. This is another huge financial burden and a grave cause of making power expensive for the end-consumers.
The two capital burdens – circular debt at Rs2.2 trillion and capacity payment at Rs1 trillion in 2020 – have crippled the power sector in the country.
“The high inefficiencies of distribution companies (like Quesco and Pesco) are contributing 60% towards the ever-growing circular debt, which is estimated to reach Rs4 trillion by 2025,” Engro Energy Limited CEO Ahsan Zafar Syed said while talking to The Express Tribune.
His comments were made in the wake of a study his firm conducted to sort out problems in the power supply chain titled ‘Fixing Pakistan’s Power Sector.’
The study indicated seven challenges in Pakistan’s power sector. Five of them are imminent ones. Putting them in a sequence, he said, circular debt has remained the biggest challenge among all. The government has to fix distribution companies to address the debt, as the companies’ inefficiencies are contributing 60% to the debt every year.
There are a total of nine distribution companies in Pakistan, excluding K-Electric. They are allowed to incur 16% line losses (which is recoverable from consumers through monthly bills). In addition to this, they book another 12% line losses, including due to theft.
Secondly, their recoveries remain low by up to 40% against the monthly bills. A large number of the consumers are in the habit of not paying their bills despite many of them being capable.
He suggested that provincial governments should be given ownership of the distribution companies in partnership with corporate entities. The governments should be given the task of recovering bills and law enforcement agencies should come into action against those who don’t pay their bills, he said.
At present, distribution companies are a federal subject while law enforcement agencies remain provincial subject, he added.
The federal government may link recovery of monthly bills from consumers with the NFC award through which federal government transfer resources to provincial governments every year, he said.
The corporate entities should be given the responsibility of operating the distribution companies on professional lines, he said.
“Pakistan and Turkey had similar issues in their respective power sectors in 1994. Turkey has resolved them by taking strict measures. We have been given three power policies since then but are still facing the decades’ old issues today as well,” he stated.
The second biggest challenge in the sequence is excess power production capacity. The government should not approve of setting up new production plants. “We still have 7,000MW surplus production capacity in the system as of today. It is estimated to be around 3,500MW in surplus by 2025.”
The third imminent issue is lower demand for power. The demand has remained low over the last decade despite an increase in economic activities. “The demand increased by 4% CAGR (compound annual growth rate) compared to GDP growth at 5.3% CAGR over the decade (2007-2019),” he said.
Surprisingly, the demand for power from households has remained higher than the one from the industrial sector. “This happens nowhere in the world,” he highlighted.
Syed said the GDP grew on back of services sector instead of manufacturing one. “The government should create an enabling environment for industrialisation to increase power demand and reduce capacity payment.” Besides, industries should be offered incentives to use power from the grid instead of producing their 5,000MW through captive power plants.
The fourth challenge is the high cost of power. Pakistan produces the most expensive power in the world. “Our cost of power production is 26% higher for the industrial sector compared to other regional countries like Vietnam, Sri Lanka, Malaysia, Bangladesh, South Korea, Thailand and India. It is 28% costlier for residential areas than the regional countries,” he said.
Pakistan has added 10,000-12,000MW production capacity in recent years and another 10,000 to 12,000MW is in the pipeline. Surplus power production and capacity payment to the standby plants has remained a major cause of producing expensive power.
“The capacity payments are estimated to soar to Rs4 trillion in 2025 due to ill-integrated planning in the sector in the past,” said the company official. The government should allow independent power producers to pay previously acquired expensive loans through acquiring new cheaper loans. And the period of paying off loans should be increased to 20 years from 10 years at present. This will also reduce the cost.
The fifth challenge is import of fuels (furnace oil, RLNG, and coal) to produce electricity. Almost 50% of the fuels are imported for generation at $5.5 billion. This is another huge burden on the national exchequer. “Pakistan should shift focus on renewable energy solutions (solar and wind power) and Thar coal to get rid of expensive import of fuels,” he suggested.
“Power outages and expansion of transmission infrastructure are not imminent challenges. They can be fixed later on…after a couple of years,” Syed emphasised.Muttahida Qaumi Movement-Pakistan (MQM-P) Convener Dr Khalid Maqbool Siddiqui on Tuesday lashed out at the Sindh government for appointing “non-local officers” as administrators in cities across the province.
Addressing a press conference in Karachi, he began by saying that the party had certain “concerns”. “Having concerns is not a sin because things have been announced on multiple occasions but nothing has ever happened.”
He added that the party would not comment on the funds allocated for the metropolis under the Karachi Transformation Plan, a financial package worth Rs1.1 trillion. “Some people are conducting a post-mortem of what is being given. We don’t want to do that,” he said in an apparent reference to the PPP.
Karachi’s development is inextricably linked with the country’s development but our concerns manifested into a reality when the city’s administrator was appointed, he said.
On Saturday, the provincial government had appointed senior bureaucrat and former commissioner of Karachi Iftikhar Shallwani as the city’s administrator.
Sindh Governor Imran Ismail on Monday stated that Shallwani’s appointment was a consensus decision of “all stakeholders”. However, the MQM-P, a key partner of the PTI in the centre and one of the main political players in Karachi, had called the move an injustice and discrimination on ethnic grounds.
“The MQM-P strongly condemns the decision to appoint non-resident officers as administrators in the cities of Sindh, including Karachi,” the coordination committee of the party had said in a statement.
“What was our demand? Our demand was that the city’s administrator should be a person living in Karachi, someone who is able to understand the woes of the people. Someone who is not politically affiliated with anyone,” said Maqbool during today’s press conference.
“We had the same demand for Hyderabad, Larkana and Sukkur. This is the way to do things in a civilised society. When we expressed our concerns, we were told that it was not appropriate to appoint a separate administrator and that is why the deputy commissioners were given this responsibility.
“If that’s the case, then why wasn’t the Karachi commissioner given this responsibility?” he asked.
Allegations of preferential treatment
Turning his criticism towards the federal government, he said he was stumped as to why it allowed future development work to be carried out by a “bureaucrat” of the PPP government.
“If you wanted to put Rs1.1 trillion towards the city’s development then you should have done so through those who know Karachi.”
He said that the appointment of the District East administrator was also raising questions. “People say he is under investigation by the National Accountability Bureau for being involved in two projects in District East with Anwar Majeed [Omni Group chairman],” he said.
You deemed such individuals capable but you don’t think Pakhtuns, Punjabis or Urdu speaking are capable, he said.
He said that the party was receiving calls from across the province from concerned citizens, questioning how long the MQM-P would watch the “drama” unfolding. “Why are people of a certain ethnicity being preferred as administrators in the province’s cities?”
Commenting on the Karachi Transformation Plan, he stated that the city generates a yearly revenue of Rs3 trillion. “In three years, this city will have given Rs9 trillion when and if Rs1.1 trillion are spent under the development package.”
He added that the Centre had fulfilled its end of the bargain when it came to certain development projects, but the provincial government had failed. “Won’t we have concerns? They ask us to believe, but we have concerns.
“And after the appointment of these administrators, no one will be able to stop our concerns from changing into a reality.
“These concerns will exist until those who can relate to the pain and suffering of this city, with credibility and a spotless past [are appointed].” He added that if the party is forced to come onto the roads, it would do so.
Maqbool also lashed out at the federal government for not being stern enough with the provincial government. “They will be absolved of all of their sins, but we are questioned over a few comments,” he said, adding that nobody was concerned about their criminal past.
‘PPP divided Sindh into two pieces’
He added that the PPP had divided Sindh into two separate pieces: “One which spends and one which earns. And you, not us, divided the province into two on ethnic grounds.”
He added that those who oppose the division of the province are the biggest “traitors” because they don’t think of the province as an administrative unit. “Like districts and divisions, a province is also an administrative unit.”
Another central leader of the MQM-P, Wasim Akhtar, had lashed out at the PPP government last month, claiming that it didn’t want development to take place in the city.
“Karachi feeds you and your children. You have set up shop here after coming from different districts. This is Paris for you. I have seen the houses you have purchased in Defence and Clifton,” the Karachi mayor had said.