ISLAMABAD: Amid rising temperatures, the Pakistan Muslim League-Nawaz government is trying to solve all the problems that could hinder fulfilment of its promise to end loadshedding in the country by next year.

In recent closed-door meetings presided over by Prime Minister Nawaz Sharif and attended, among others, by Finance Minister Ishaq Dar and Power Minister Khawaja Muhammad Asif, issues of mismanagement, re-emergence of circular debt and ‘the capacity trap’ have been discussed in considerable detail.

Traditional players in the sector, meanwhile, are competing to secure additional generation capacity, and that too based on imported fuel like coal, before the nation goes to the polls next year.

If they get what they want the country may end up having to deal with excess capacity and the resultant challenge to make timely payments to the stakeholders concerned, much like the episode of mid-90s that occurred during the days of the Pakistan Peoples Party government. The party that took over the reins from the PPP — the PML-N — had to tediously renegotiate timelines for overcapacity contracts which cost the country dearly in terms of its reputation.

Questions raised about issues of mismanagement, re-emergence of circular debt and ‘capacity trap’

Sources said the government had placed a ban on power plants based on imported fuel in June last year because it wanted to avoid overexposure to foreign exchange repayments. Based on this logic, two coal-based projects of Siddique Sons and Lucky Cement were almost forced to switch over to local coal even though they had valid letters of interest.

Even before that, Punjab’s three plants of about 3,600MW based on imported coal — Haveli Bahadur Shah, Bhikki and Balloki — were turned into imported LNG-based projects. The move was allowed because it was seen as the better of the two options available, in the interest of ending loadshedding by next year. Two plants at Rahim Yar Khan and Muzaffargarh, on the other hand, were cancelled.

All this was done because the Chinese officials thought it would be uneconomical to transport imported coal to Punjab’s plains. At the time the power ministry had moved swiftly despite resistance from a group of power producers — abbreviated as NB, SS and MM — and was able to include Diamer-Bhasha Dam’s power generation component in the priority list of the China-Pakistan Economic Corridor (CPEC) in Beijing in place of the coal-based projects in Rahim Yar Khan and Muzaffargarh.

As a result, the 1,320MW Sahiwal plant became the only coal-based project to survive from among the six planned for Punjab.

A campaign was then launched to question the demand-and-supply data and also the ‘Circular Debt Capping Plan’ of 2015. This culminated in a powerful push by an influential group of power producers to get the Rahim Yar Khan project revived.

A meeting of the cabinet committee on energy (CCE) held a couple of weeks ago directed the power ministry to “evaluate a proposal regarding re-inclusion of the Rahim Yar Khan coal-fired power plant in the CPEC list and possibility of its conversion to LNG”.

Sources said that senior officials in the Central Power Purchasing Agency and National Transmission and Despatch Company (NTDC) are under extreme pressure to approve the Rahim Yar Khan project even though it did not fit in the current demand-supply projections simply because it would not be ready for generation before 2022.

At a meeting of the CCE chaired by the prime minister, former power secretary Younas Dagha candidly warned that unless management issues were addressed thousands of additional megawatts could literally go to electricity thieves, instead of ending outages, and hence add to the circular debt.

He recalled incidents in which engineers were found selling electricity in bulk to unauthorised consumers in the heart of Lahore.

Mr Dagha was also reported to have questioned the timing of his unceremonious removal from the power ministry ahead of what he called a crucial summer. He was removed in the first week of April and his line of argument was that his successor Yousaf Naseem Khokhar would not even be able to settle down in his position before having to deal with sudden surges in demand as the temperatures rose.

In the mean time, the government is reported to have blocked a Rs33 billion arbitration bid initiated by the Independent Power Producers (IPPs) while the government has raised Rs13bn claims against working capital paid to a group of such companies.

All this can have substantial impact on the circular debt capping plan that required reducing the debt to Rs204bn in 2018 from Rs303bn at the end of 2015. The finance and power ministries are already questioning each other over the total debt that now stands at Rs401bn, up from Rs329bn on March 31.

Published in Dawn, June 5th, 2017