THERE is a growing risk that the government is now on a buying spree for more power- generation capacity than the country can handle. Sometime in the middle of last year, the government placed a cap on contracting further power-generation projects that rely on imported fuel. This was in line with projections of the burden these would place on foreign exchange reserves, which would be beyond what the economy could manage. There was also a cap on further power projects that have capacity payment charges built into their terms, since the additional power capacity that is currently in the pipeline is already going to leave the government with a massive bill. A vigorous conversation has been taking place within the water and power ministry ever since, focusing on these caps. This has not been without its casualties. Powerful vested interests wanting to be part of the rackets now brewing in the power sector have wielded their clout to get their way and have the caps adjusted or removed.

Only last week, we heard of a warning from the chief of the National Transmission and Despatch Company that runaway commitments to contract more and more power are being given to various parties. The latest is a commitment to the Sindh government to buy power from bagasse, the waste by-product from sugar mills, that the NTDC and the ministry have been resisting. For some reason, the Sindh chief minister is mounting an unusually strong representation on behalf of the sugar mill interests of his province. There are numerous other examples of projects being brought into the fold that had previously been scrapped. The government is in a mood to accommodate the chief minister’s request, more likely on political grounds than having anything to do with forecasts of power demand. One result of these runaway commitments is that the bill for capacity payments will be beyond the government’s ability to handle by 2020 when most of these plants have been commissioned, causing large-scale damage to the country’s fiscal framework without yielding any significant dividends in return. The country may be in the midst of an acute power shortage at the moment, but that does not mean that these plants be commissioned with reckless speed. The government should heed the warnings of overcapacity, and tread carefully when tampering with the caps of last year.

Published in Dawn, May 29th, 2017