Decentralization and Deregulation is the Solution to Loadshedding Issue in Pakistan

Federal Government in Pakistan has had control of power sector since creation of Pakistan, but has failed in its duty to ensure smooth supply of electricity to consumers. WAPDA which is under a federal government ministry is responsible for buying power from power generating companies and distributing it to electricity supply companies who then sell it to the consumer. Due to massive corruption on highest level, most of the oil for state owned power plants is stolen, also IPP's don't supply their quota of electricity. Additionally, there are massive losses due to power theft. Paying off circular debt by injecting billions of rupees is not a solution to electricity crisis in Pakistan. PPP government injected 1500 billions rupees in last five years, Pervaiz Musharraf government must have injected hundreds of billions of rupees into WAPDA as well. Where do we stand after spending so much on thermal power and specifically losses incurred by WAPDA. Where is all that money gone ? Short answer is that fuel is consumable, there is no electricity and no trace of where all the money disappeared. Circular debt has become the most convenient corruption tool at the highest level, and that's why most of our political parties and bureaucracy wants to focus on settling this. In short, despite having control of power sector for entire history of Pakistan, federal government and WAPDA have failed to ensure smooth supply of electricity. It is time that federal government and WAPDA accept their responsibility and failure and decentralize the control of power distribution and generation. Provincial governments and electricity supply companies such as LESCO, PESCO etc should have complete autonomy, be responsible and accountable for electricity supply to their consumers with federal government regulating the sector and looking after consumer interests. Centralization and tight control by federal government is the main reason behind massive load shedding and circular debt. During last five years, Punjab has suffered a lot due to excessive federal control. Unless system is reformed, this would continue to happen in different forms and in different places and it may happen again in Punjab as well. At present circular debt stands at Rupees 537 billion, and it is increasing at a very rapid rate. Paying ever more huge amounts to ease circular debt has not resolved this problem in the past, and PML(N) government will not be able to resolve it this way. But if PML(N) government chooses to maintain centralize control while using tax payers money to ease circular debt then surely its only aim will be to enrich its stake holders rather than solving this national issue or

problem. Here is how it power sector should be reformed through reorganization and decentralization in Pakistan: 1). Provincial governments shall be responsible for fixing prices of electricity, and federal government should have no role in this. Provincial governments will thus be responsible for circular debt if any. a). Provincial government can reduce the risk of mismanagement and circular debt etc through aggressive privatization of power distribution companies where possible and feasible. Where privatization is not feasible provincial government should try to improve conditions and take over losses. b). Provincial governments shall own electricity supply companies and may have full freedom on their operations and privatization. c). Provincial government should be able to supply international guarantees to IPP's where required. 2). Electricity should be bought/sold from power generating companies through electricity marts. The electric supply companies should be able to buy electricity directly from IPP's in these marts through a transparent bidding process. Electricity marts will give more confidence to investors who will be able to sell their electricity without having to deal with corrupt ministers and government officials. This will bring in more investment. 3). Federal government shall only be responsible for operating national grid through an independent company. All provincial governments should be share holders(board of directors) of that company. 4). Federal and provincial government can focus on reducing electricity prices by investing in cheaper electricity generation through solar energy, coal , natural gas, atomic power etc. This electricity will then be sold through electricity marts to regional power distribution companies. 5). WAPDA should concentrate on economical power generation e.g. hydal, solar , coal etc and should be completely taken out of power distribution sector. 6). WAPDA should not be involved in managing national grid, and a separate/independent entity should manage national grid. 7). Eliminating CNG for all vehicles a tough but necessary decision that should be immediately implemented in a phased manner. There should be two steps, 1). Increasing loadshedding for CNG stations and giving deadline to CNG stations to close down or convert to petrol stations in 6 months time. Very first step of PML(N) government after coming to power should focus on restructuring of

power sector on war footing. This can easily be done by giving full autonomy to profitable electric supply companies such as LESCO and provincial government to get electricity directly from power generating companies. If PML(N) goes on the same path as previous PPP government then it will end up spending 3000 to 4000 billion rupees in next five years on overcoming losses incurred by WAPDA( also known as circular debt). It would be a great success of PML(N) government if they can sell LESCO and other profitable power supply companies to internationally reputable and experienced investors. Government will then be able to focus on regulation of power sector and focus its energies on generating cheap electricity. If the PML(N) government successfully executes privatization and deregulation policy in power sector, then it would have invested 2000-3000 billion rupees(in next five years) in generation of power from cheaper sources and would have not only overcome energy crisis but also considerably reduced the prices (as compared to prevailing market conditions at that time and our neighboring countries). This would naturally boost our economy taking it ahead of many of our competing countries. Our aim should be to overcome electricity crisis and be able to supply electricity to India in next five years. Reference http://www.thenews.com.pk/article-101894-Power-crisis-to-be-addressed-on-war-footing:Nawazhttp://www.pakistantoday.com.pk/2013/05/11/news/profit/rs-537-billion-circular-debt-to-decidefate-of-omcs-in-new-budget/ http://www.thenews.com.pk/Todays-News-13-23034-PML-N-finalises-short-term-plan-to-endpower-crisis