November 23, 2005	Wednesday	Shawwal 20, 1426

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ISLAMABAD, Nov 22: High tariffs, poor quality of service, unreliability and the high cost of backup power are the binding constraints in Pakistan’s power structure which need to be urgently removed, says the Asian Development Bank (ADB).

Informed sources told Dawn that the bank had offered adequate financial and technical assistance with a view to equipping the National Electric Power Regulatory Authority (Nepra) with the capacity to effectively regulate the power sector in the country.

The ADB said that one of the major constraints was the inefficiency which was plaguing power utilities in Pakistan.

The bank said it was willing to provide all possible assistance to make Nepra an effective power regulator in the absence of which the power sector will remain largely inefficient.

In order to maximize the gains from infrastructure privatization, the government must invest sufficiently in capacity building of Nepra, particularly in human resources.

International evidence on infrastructure privatization suggests that Pakistan’s current structure of power supply will produce only limited efficiency gains because of not having strong regulator to look after the public interest and active competition at the generation and distribution levels.

“The success of infrastructure privatization in Pakistan depends on the government’s ability to enforce its commitment to unbundling and competition,” says a latest bank study.

It said that current structure of power supply remains state-run and uncompetitive. Wapda owns generation companies, which do not compete with independent power producers (IPPs). It also owns distribution companies, which do not compete with each other because their territories are geographically delimited.

If Wapda and KESC were able to provide electricity efficiently and reliably, there would be far less need for backup power. The government has already initiated a number of policy reforms to address the factors that underlie these constrains which are largely line losses and opaque tariff structure.

These include: the imminent privatization of KESC (which has just been completed); the consolidation of Wapda’s generation capacity under three generation companies; the division and organization of distribution under eight distribution companies; high-voltage transmission has been organized under the National Transmission and Distribution Company (NTDC); and Nepra has been established to safeguard the interests of consumers.

The government’s aim is to scale down and integrate Wapda’s Power Wing with the NTDC, if the NTDC itself cannot be privatized, and to privatize the generation and distribution companies as soon as possible.

The experience of developing countries suggests that infrastructure privatization is not a simple matter. While privatization generally improves performance, there have been a significant number of failures. Successful and efficient privatization should focus on unbundling of services and creating an autonomous, sector-specific and specialised regulatory authority that can safeguard the consumers’ interests, the study said.

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