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New secretary finance

Updated March 21, 2019

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The writer is a member of staff.
The writer is a member of staff.

AS I write these lines, the government has notified a new finance secretary as the present one retired. What a moment for a new person to take the reins at Q block, just as the IMF talks are possibly reaching a decisive stage, when the budget-drafting process is just getting going, when the revenue effort has slackened to a point where one report recently declared that the FBR is headed for the largest revenue shortfall of its history, and when current expenditures are on a near runaway path to the point where the federal government is blowing hot and cold at the provincial governments, demanding that they share in the cost of subsidies and perhaps a lot more.

What a moment to arrive into a new job!

The new secretary is Younus Dagha, a BS-22 officer of the Pakistan Administrative Service who has previously held the positions of secretary commerce and secretary water and power. Before that he was toiling in the provincial government of Sindh.

Let’s start with a full disclosure: Dagha is a friend, somebody I have known for 10 years. He was posted as secretary mines and minerals of the Sindh government back in 2009 when I was making a documentary on the Thar coalfields. I wanted to visit the region, go to a few sites where exploratory drilling work was going on, visit the site of the Shenhua project, the Chinese state-owned enterprise that worked for close to four years outside Islamkot to map and study the coal seam and produce the first feasibility study of the Thar coal-fired mine-mouth-based power plant in the desert back in the early 2000s.

That project ended in tears for various reasons. Wapda insiders claim it was over a tariff dispute that broke out between the Wapda chairman and federal government officials at the time, while a senior official from the Musharraf government (who had direct knowledge of the matter) once told me that it died because Shenhua’s parent company was floating an IPO of some of its shares in Hong Kong, and the presence of the Thar coal project on its books was impacting the price adversely due to the massive (financial) risks involved in it.

The notification of Dagha’s appointment came on the very day that the Thar coal project began to pump its power into the national grid.

But I digress. That project lay dormant from 2004 onwards once the Chinese pulled out. A few companies came in the meantime and did their own feasibilities, such as AES, but decided against investing in Thar coal-based power generation, again mainly due to the risks.

The water availability was a problem (coal-based power plants require massive quantities of freshwater for their cooling towers), and evacuation of the power would cost a fortune, and the mining know-how to run an integrated open-cast mine and power generation project was simply nonexistent in the country. This meant all technical know-how would need to be imported, either through recruitment or direct foreign investment. And foreign investors acquiring massive stakes in a remotely located project, heavily dependent on government meeting its promises, seemed like a very distant dream in those days.

Remember what 2009 was like? The bombings, the recession, the political noise and rupture of ties with the United States and the fallout from Mumbai while a massive macroeconomic adjustment was under way, slashing development spending to the bone and drying up government coffers to levels never before seen?

It was in the midst of all that that the Thar coal project began anew when the Sindh government devised a framework for the grant of mining concessions in the desert and sent out an invitation for companies to submit their expressions of interest. It was through that process that Engro acquired a lease to mine coal in block 2 of the Thar desert, and went on after that to get a tariff that it could work with and began work.

This was only possible when the federal government credibly made a commitment to arrange for evacuation of power from the desert to load centres upcountry, through a transmission line from Mithi to Jamshoro (which alone cost close to Rs15 billion), and then another state-of-the-art transmission line from Matiari to Lahore.

It was Dagha, as secretary mines and minerals, who initiated and successfully saw the grant of mining concession in the Thar desert through. And it was Dagha again, who as secretary water and power, saw the award of an upfront coal tariff (under which Engro made its investment in power generation), as well as construction of the transmission lines through to success, and worked with his Chinese counterparts on the various power projects that were implemented across Pakistan, including a Chinese partner for Engro, to make up the skills deficit hobbling the project.

And then, as if by some sort of cosmic coincidence, the notification of his appointment as secretary finance came on the very same day that the Thar coal project began to pump its power into the national grid.

Never mind for a moment that I count the man among my friends. Having disclosed that at the outset, let me say that the prime minister (who made the final selection for the position from a shortlist of three) has made a good decision at a critical time. But as I wrote to him right after the decision was announced, it will take more than luck for him to succeed in this post at this time.

One critical priority for the new secretary will be to seize the initiative on economic policy back from the vested interests who have hijacked it. Only the day before he was notified, the World Bank released a report saying that four vested interests have captured Pakistan’s policymaking: the feudals, the industrialists, the bureaucrats and the military.

At the moment, the government he serves needs direction on economic policy, as it is caving in to all special interests, the consequences of which are piling up in the public debt and resultant inflation. Wresting this space back should be priority one.

The writer is a member of staff.

khurram.husain@gmail.com

Twitter: @khurramhusain

Published in Dawn, March 21st, 2019

Correction: An earlier version of this column stated that the cost of the Mithi-Jamshoro transmission line was approximately $15bn instead of Rs15bn. The error is regretted.