ISLAMABAD - The federal government has failed to achieve the target of enhancing the installed power generation capacity by 1,027 MW during 2015-2016 and has just added 402.66 MW.

“A key recurring factor that has impeded progress in tackling the electricity crisis has been the issue of circular debt. The issue is primarily of a cash flow problem that leads to operational inefficiencies and liquidity constraints as it cascades down to other components of the payment chain. Using figures from the IMF, the stock of payment arrears has increased from Rs313 billion in June 2015 to Rs321 billion in June 2016,” said PILDAT’s report on the performance of the Ministry of Water and Power (MoWP) during third year of the incumbent government.

Following the introduction of the National Power Policy 2013, the government has been trying to minimise the loadshedding and address the challenge of providing affordable, reliable, sustainable, and secure energy. Three years later, some progress has been made but the short-term goals have seen mixed results. These include addressing the gap in the demand for energy through focusing on increasing power generation and decreasing the cost of generating power. As part of its plan to enhance the installed generation capacity of electricity by 1,027 MW during 2015-2016, the federal government only added a total of 402.66 MW.

Pakistan has also suffered from a high cost of generation due to the dependence on crude oil based thermal power plants which formed 66 percent of all power generated in 2014-2015, the report pointed out. However, despite crude oil prices having fallen in the past two-year period, power subsidies remained high. The rural consumers suffered the most from the country’s energy crisis in 2015-2016 because they faced more than eight hours of loadshedding on average, the report added.

The power sector, because of low oil prices, has been able to keep the arrears under manageable levels, which helped the independent power producers to keep afloat, the report said. As a result of the government’s focus on the revival of the economy, private industry only saw about one to three hours of loadshedding on average while the urban consumer still faced about six hours of loadshedding on average, PILDAT’ report maintained.

The privatisation of generation and distribution companies was one of the cornerstones of the National Power Policy 2013. In 2015-2016, the federal government announced and then backtracked on plans to privatise three Distribution Companies (DISCOs) amid political opposition. Instead, Initial Public Offerings (IPOs) for a minority share in ownership of DISCOs are being offered to the private sector, the report noted.

The PILDAT report, however, noted positive progress in the management of power losses through the national grid and systematic theft. Through the use of capital expenditures to strengthen infrastructure, and revenue-based management, the MoWP was able to reduce transmission and distribution losses by 0.8 percentage points to 17.9 percent in 2015-16 from 18.7 percent in 2014-2015. This was also accompanied by improvement of the ratio of bills issued versus bills collected in 2015-2016 to 94.6 percent compared to 83.2 percent in 2014-2015, attributed to the introduction of billing systems through mobile meter reading introduced by the DISCOs in 2015.

The report recommended that sustained solutions to tackle the energy crisis in Pakistan would need more than just low international oil prices. Structural reforms, simultaneous investment in transmission and distribution infrastructure, measures to improve governance and instituting transparency in metering systems will have to be adopted.

PILDAT’s assessment of the performance of the Ministry of Water and Power in the third year of the federal government June 5, 2014-June 4, 2016 is part of PILDAT’s annual assessment of performance of key state institutions.