BY every reckoning it was going to be a tricky job — managing the politics of the moment, keeping unwanted intrusions at bay, and handling an economic situation moving towards a crisis.
The interim government had its job cut out for it from day one. So let’s first acknowledge the difficulty of the situation they stepped into before anything else.
But some of the missteps have been regrettable and carry serious consequences. The biggest misstep thus far has been the delay in appointing a finance minister, a serious individual who can credibly cut through the hype that the power-sector bureaucrats routinely serve up to extract more public resources to pay for their inefficiencies.
Nothing shows the seriousness of this misstep more than the loadshedding afflicting large portions of the country.
Part of the loadshedding derives from unexpected acts, like attacks on a gas pipeline in Uch which put a sudden and large strain on furnace oil stocks and disrupted the 16,000 tons supply per day benchmark that Pakistan State Oil (PSO) had set for itself.
But a large part of the reason for the loadshedding is the mushrooming circular debt, a problem so old and so well-known by now that the words are part of common parlance. The other day, my rickshaw driver knew the term.
Immediately upon arriving in power, the freshly minted interim government was faced with an intricate and old problem whose proportions are so large that it will be weeks before the gentlemen can figure out anything about it. The only one amongst them who has an idea is the minister for petroleum, Suhail Wajahat Siddiqui, who has seen the problem up close and personal as chairman of PSO’s board.
Here’s how these things typically work. First the power generation falls precipitously. A meeting is convened. The water and power people are asked why. They respond they are short of fuel stocks and have no option but to shut down power plants.
Then the petroleum people are called. They’re asked why the fuel shipments aren’t being made. They reply they have an LC (letter of credit) that is about to become due and they need money to retire it, else Pakistan could default on its external obligations. The water and power people haven’t paid their bills from the fuel consumed thus far, so they have no option but to ask for payment up front for any further fuel deliveries.
The water and power people are asked why the bills haven’t been paid, and they roll out a presentation they made almost five years ago, ‘…cost of generation … recovery issues ... Karachi … Fata….’ they drone on. ‘Our customers don’t pay us, we have no money to pay our fuel supplier, and influential peddlers disallow us from disconnecting large defaulters,’ they say.
At this point the prime minister will scratch his head and plunge into thought. ‘How much money is required to get the fuel moving again?’ he’ll ask PSO, usually represented by the managing director and the minister petroleum.
An amount will be quoted, usually outlandishly large, like Rs80 billion or so. ‘No, no, we can’t manage that’ will come the reply and the finance ministry will be called. ‘How much can you arrange secretary sahib?’ the prime minister will ask.
‘I have nothing sir, you know that,’ will come the reply.
The conversation will follow a predictable path after that, where the original amount quoted by the petroleum guys will be whittled down to just around double figures, eight, nine, 10 billion or so.
Finance will be ordered to arrange the funds immediately, and water and power will be ordered to prepare a plan to improve recoveries for their sector.
A press release will be issued: ‘The prime minister, taking serious notice of the power situation obtaining in the country, has ordered the immediate release of….’
All this will happen with furious media coverage of power shortages everywhere as an accompaniment. A year or two ago, there’d be accompanying footage of power riots, but it looks like the people have tired of that sort of thing.
Now its just stock footage of people in markets sitting in dark shops and fanning themselves with a hand-held implement of some sort that gets the job done.
But once the oil starts to flow, PSO retires its LC, and the power plants whir back into motion, the lights come back on and everything is forgotten. Until the next LC becomes due, and the whole drama repeats itself.
This is why we need serious people at the helm in finance. People with experience, so we’re not learning the same lessons over and over again.
The power crisis in this country is acquiring deadly proportions: only five years ago for instance, we were spooked by numbers like 40 or 50 billion as outstanding or overdue amounts. Today, the amounts being quoted are ten times that much, and the only thing we’ve learned is the term “circular debt”.
We killed a year blaming the power crisis on the Musharraf government. ‘Not one megawatt…’ went the line in the opening years of this sordid story. Then we killed another year or two blaming it on the international price of oil. ‘Deteriorating fuel mix…’ went this line.
We spent the last couple of years blaming it on a culture of exclusivity that allows some to enjoy unlimited electricity without ever having to pay their bills, until we realised that this line was propagated by the water and power bureaucracy largely as an excuse for their own incompetence, because the bills themselves are of dubious merit.
We cannot continue like this for much longer. It is imperative for the incoming government to understand that the power crisis stems from a failure to bring about reform in the power sector.
We’ve wasted five years already looking for someone to blame for the power crisis. Let’s not waste another five trying to punch our way out of this paper bag.
The writer is a Karachi-based journalist covering business and economic policy.