ISLAMABAD, Sept 7: The World Bank (WB) has expressed serious concern over the state of affairs in the power sector which may choke the country’s development instead of being an engine of growth, Dawn has learnt. The WB has also found the corporate companies of Wapda, particularly its distribution companies, to be in a rudderless situation, which are practically neither independent nor managed under a vertically-integrated system.

A senior official of the water and power ministry told Dawn on Wednesday that the bank was specifically perturbed over non-implementation of power purchase tariff for distribution companies and subsequently non-notification of separate consumer tariffs for the last 18 months.

The WB is also unhappy over the disagreements between the federal government and the National Electric Power Regulatory Authority (Nepra) about some of the underlying principles and “apparent infringement in the division of responsibilities” between the two.

Mainly because of these issues and a host of other pending decisions, the WB has already delayed the approval of about a $500million Public Sector Capacity Building Programme (PSCBP) until the start of the next fiscal year in July 2006.

“Under such circumstances, it is more likely that the performance of the sector would further deteriorate rather than improve,” said the WB in its latest update on Pakistan’s power sector.

Setting a deadline of September 30, 2005, the WB said: “The determination of tariffs for the Discos — and thus, determination of end-user tariffs - is the single-most important outstanding action in the sector.”

In the absence of company specific tariffs the Discos, although legally separate companies, have not been able to act as such. It is then not at all surprising that Wapda, whether it wants or not, has continued to manage the sector in the traditional way, the WB said. “Such a situation is confusing and unsustainable,” it said.

Technically the sector has been unbundled into separate entities with corresponding management and ownership structures and reporting relationships but is still being financially managed largely as a vertically-integrated utility although without the managerial instruments of vertical integration. “As a result, there are major misalignments of the incentives, responsibilities and accountabilities among the various players.”

The WB has advised the government that to counter the risk of further deterioration and to enable decisive progress in other areas of reforms like commercialization, financial restructuring, financial performance, reduction in subsidies, investment and privatization, the Discos must become independent companies with tariff-defined company-specific budgets, empowered and able to run their business and fully accountable for their performance.

“This is also of vital importance for successful preparation and implementation of investment projects in the distribution networks, including the World Bank’s financed project.”