AFTER what appeared to be a recovery since 2013, the power sector seems to be headed back to a situation where it is choked with debt and gripped by antagonism between power producers and the purchaser. The Private Power Infrastructure Board has addressed the power producers in strong language, accusing them of trying to “malign the government” after the producers had taken out an advertisement threatening to invoke their sovereign guarantees if their outstanding bills were not paid promptly. The PPIB described the advertisements as “ill-founded, baseless, disparaging, malicious and false statements”, and went on to say that the power producers were trying to cause “panic, unrest and distress…to harm the national interests” and that this action “amounts to creating civil unrest”. Clearly, the gloves are off. The tussle is not restricted to words only. The power producers have already activated their sovereign guarantees, which for the moment the PPIB has managed to fend off on a technicality.

This situation cannot, and must not be allowed to, continue for much longer. In many ways it hearkens back to the years of the previous government that saw big tussles between power producers and the government, due mainly to the circular debt. But as the Secretary Water and Power has pointed out in a recent article, the circular debt grows out of multiple cash streams, for which different parts of government are responsible. Holding together a sector that depends in part on subsidies paid by the finance ministry, on tariffs and targets decided by Nepra, on tax refunds processed by the FBR, on fuel shipments and payments managed by the ministry of petroleum and so on, can become so complicated that a failure in one part of the system quickly causes bills to accumulate in another part.

To reform this entire unwieldy enterprise was one of the central promises made by the PML-N government. They made the promise in their campaign; they repeated it after the first mammoth circular debt retirement with which they began their term; and again when they made their first approach to the IMF. But since then, talk of reform subsided and the management of the power sector moved ahead with a few changes, but no large-scale reforms. This approach, business as usual with a little tinkering at the margins, now appears to have run its course. Another large-scale settlement may soon be required, and since the PML-N is counting on winning the next election with the massive megawatts from the new CPEC plants, it will need to ensure that all turbines in the system are revving at full capacity. All the focus that the party has given to the power sector has been on adding more megawatts, with not enough attention given to reforming pricing and system structure. The bill from the neglect is now piling up.

Published in Dawn, March 31st, 2017