The entry of the Independent Power Producers (IPP’s) into our power arena was a major policy jerk, effected through the Energy Policy 1994. The country starving out of significant power drought, oozing out through grave load-shedding at that time was an expected outcome of the long lull before storm.
Before the Energy Policy 1994, power planning has long been abandoned by the concerned agencies to follow an ostrich-like approach of relying upon existing power infrastructure, which itself was too shrinking aground to be relied upon for future.
In the hub of such lassitude, the future forecast of growth in demand, industrialization factor and rapidly stretching arc of new consumers never alarmed our power planners up from their deep slumbers, which speaks volumes of their professional credibility. In the past, heated debates and scathing criticism upon the fallouts and damage incurred through such IPP experience were heard, but little attention was paid to the constraints and inevitabilities which had left no choice for us, except to seek the participation of the private sector to cushion the sinking power sector of the country.
The Energy Policy 1994 was a liberal initiative to offer a standard tariff of 6.5 cents/kwh for the first ten years, allowing indexation with rupee/dollar fluctuations as well as giving free hand to sponsors to choose site, fuel, capacity with a lavish award of financial and fiscal incentives. Interestingly, feasibility study was never cast a factor to affect the overall reliability of project, which proved to be major drawback in the policy. The procedure was kept simple and the one-window operation was offered through the formation of the Private Power & Infrastructure Board (PPIB) to ensure transparency and invite the attention of international investors.
The efforts behind such moderate showdown bore fruit when the country witnessed heavy investment offerings in the power sector from 1994 to 97, and to that extent the policy can be said a successful initiative. It was a remarkable opportunity for the country to pioneer an era of power development in the region, but sadly, the captured ground was lost at the altar of grave contractual as well as administrative mishandlings. In such a phase of debacle, it was actually a weaker legal-cum-contractual side, where we failed to impress upon the other side to understand our motives and so to flex their interests.
The national interest behind seeking cheaper electricity was either misconceived or deliberately kept in the back burner to follow mad glide, leading towards unscrupulous signing as well as bewildered amendments in the power contracts. Such a tendency did nothing except loading on Wapda and the KESC with an unbearable burden of increased contractual liabilities.
Now, taken realistically, investors and sponsors can never be thoroughly blamed, to the extent that these were our state-owned power utilities, which signed the terms of Power Purchase Agreements (PPA) and sought contractual guarantees of their performance from the government of Pakistan. The same was committed without making a remote recourse to the poor consumers, who ultimately had to face the music. Now, whether it was laissez-faire political watch up or the preempted shrewdness of stakeholders, but the charisma as well as aimed objectives of that policy were cleanly seemed hijacked. In nut shell, when the dust settled, the power sector was visibly hostage to multinational power sponsors.
The obvious portrayal of such scum stirred a consolidated public fear about the idea of IPP’s participation in the power planning, hence the option itself was condemned to the core. Whereas, the fact remains otherwise that it was actually a miscarried scheme of things and administrative fiascoes, which went a big miss, causing heavy toll of monetary drawbacks. But the rubble can not be simply blown upon the credibility of option itself, as such will be tantamount to oversimplification of a very complex riddle.
So the need arises to carefully examine the subject matter, so as to rightly put the finger at the genuine cause of the mess. Here the immediate question pops up in the mind, whether the idea of IPP’s participation be permanently abandoned for the rest of our future or some margin is still there to get the best out of that idea? That is the crucial question, which is going to decide about the appropriated place of IPPs in our power sector
In order to streamline true scope of IPP’s in our national economy, the Hydel Policy 1995 and the Power Policy 1998 were introduced to offset the growing impression of a bad dream, as attached with IPPs in public circles. Throughout such an effort, major emphasis was shuffled to establish some sort of correlation between IPP’s and available indigenous resources. Such a twist in the power policy was really futuristic as well as compatible with the existing dilemma.
The initial thumping response to the policy rather encouraged the government to introduce the Hydel Policy 1995, which was an apparent corollary to the former. However the same lacked much of the necessary preparation and homework, hence proved to be a half baked jerk. The idea of attracting IPPs towards hydel power generation has never remained easy due to variety of complications attached with hydrological risk, geo-political contours of the state, site specific nature of these projects as well as its incalculable multi-faceted side impacts, which had to be reckoned with earlier.
Similarly, the risk involved with liberal involvement of IPPs in hydel sector was by no means a hot cake, specially in the face of various sensitive aspects,like inter-provincial dispute over water distribution, BOOT (build-own-operate-transfer) nature and the comparatively longer life of these projects. In the end, the response was there, but too slow and viscous, rather much below the expected glory.
The Power Policy 1998 was a perfect reaction to previous policies, as the liberal flow was abruptly obstructed to trigger on some new trends in the power arena. Here the urgency of competitive tariff was rightly realized and the point of fulcrum shifted from unsolicited towards solicited approach.
The next important shift in the said policy was to encourage the harnessing of indigenous resources as a major supplement to imported Residual Furnace Oil (RFO), an expensive reminiscence of Energy Policy 1994. But the planners failed to foresee the repercussions of crusty red tape, which even diluted the impression of one window operation attached with IPPs management. In this regard, the complex construction of the procedure as adopted in the said policy can not be simply absolved as an inherent flaw.
Besides this, it was never realized that policies and politics should never be intermixed at the cost of merit and fair play . As much as you allow the force or favouritism in the policy framework, it will gravely undermine its very spirit. In the case of the Power Policy 1998, the apparent loophole was reactive and unsparing approach to undo every procedural swiftness of past policies and intricate the process to turn it to an investor repellent phenomena. As the consumer was the most neglected entity in the Energy Policy 1994, so remained the investor in the Power Policy 1998. It was never apprehended that a country, already starving for the inflow of foreign investment, cannot afford tight procedural risk at any stage.
Coming towards the recent splash of Power Policy 2002, let us analyze, how much we have learned from the erstwhile experiences and what else is still to be attained. The visible departure is the extension of scope towards public sector projects, public-private partnership projects as well as those projects developed by the public sector and then divested. Again the ideas have been issued with incurable optimism, as experienced before.
But a question arises as to how long we have been prepared for that ? Is our conceptual framework in tact to allow these drifts successfully? Because the meaning of divesting public sector developed projects towards private sector is apparently contaminated with the fears to put a reasonable toll of expensive tariff and billing burden for the general public. In this context, the privatization of Kot Addu Power Plant through (Kapco) is a fresh incidence. Though, the incidence did not come through previous power policies, but it resulted in an expensive purchase. In this regard the need and benefits of inflating the policy balloon should be taken with a pinch of salt, as it may cause rupture in the midst.
Secondly, the idea of minimum levelized tariff through international competitive bidding (ICB) or through ICB/negotiations for proposals on raw sites has been introduced as a measure of solicited approach. The idea is a helpful development towards minimum tariff crunch and is a long term beneficial step. Thirdly, feasibility study has again been put forward as an essential prerequisite, but there is a lot of spade-work required to ensure transparent implementation of the procedure, so as to produce a credible torch bearing source for the onward tasks.
The concept of the main sponsor having at least 20 per cent stake in equity as well as having relevant experience was a long awaited check and indication of an approach to learn from past. In this regard, it is positively augured that the technical parameters, as sprawled in the document of “request for proposal” (RFP) shall play a suitable check to filter out only the most serious and technically sound sponsors
Towards the implementation side, the real fear is from the administrative acumen of our power agencies. The ball is again put in their court as an opportunity to ward off their alleged chaotic image and yield something really productive. It is beyond doubt that a proficient and subtle implementation with a vigilant eye upon the objectives can eradicate the loopholes in the policy lines.
As the Policy 2002 is extended towards the role and jurisdictions of WAPDA, the KESC, PPIB, the Nepra, etc, the coordination in between is the immediate concern to be addressed with. Hence the board governing the PPIB has a tremendous responsibility to abridge the fears so far suspected.
Apart from this, harnessing the indigenous energy resources and tapping them towards IPPs is again a mountainous task ahead, which has a shabby track record of dismal performances. The abundance of untapped fossil fuel resources like coal and natural gas is again a massive question mark, which has kept the progress in a fix. In this direction, natural gas should be our priority for the specific purpose of said policy, which is in abundance as well as devoid of processing intricacies as are attached with the coal.
Above all these things, one should not forget that electrical power is like blood in the veins of development structure of any country and a reliable parameter of progress, but its cost should never be above the shoulders of a common man, as he is the entity who ultimately pays this cost through his sweat and pains. It is hoped that, his wretched predicament and woes should be a sufficient plea for his due consideration in the policies to follow, rather to be taken as a hostage.