Pakistan’s power assets are on sale. The privatisation minister and his entourage took their road show to Washington DC last week. The list of companies up for sale as reported in the press (The Nation 10 October 2015) includes almost the entire power generation and distribution infrastructure of Pakistan. Why does the government want to do this? And what risks do the country and its people face if these assets fall into the hands of businessmen?
As for the first question: The government is being pushed - coerced may be a better word - by the IMF and the World Bank to divest these assets. Why? Because both organisations have lent money to Pakistan. And as lenders they want their money back. Selling these power assets is a good way to do this.
This privatisation exercise is the second phase of a long term project. Recall that many years ago Pakistan had a single organisation responsible for generating and distributing power in Pakistan - WAPDA. Recall also that until then power was ample, new industries were given what they needed, and the public did not have to suffer the misery of load shedding.
The first phase, which is now complete, was to split WAPDA into many different parts. These fell into three broad categories. Power generation, intercity transfer over high voltage lines, and local city level distribution. Some power plants have already been sold.
What we Pakistanis need to consider is this: The first phase of splitting up WAPDA and privatising power plants has left us, for the first time in our history, short of power. How on Earth is pushing more of the power infrastructure into private hands going to improve things? If anything we should call a mistake a mistake and work to reinstate the unified power generation system that served us so well since our independence.
Of course both the IMF and the World Bank will deny with a straight face that getting their money back is on their agenda. Instead they will proffer the argument that privatisation will lead to better management and increased efficiency. Notwithstanding how these are defined and measured the public is more concerned about getting cheap reliable power. And in this regard, based on privatisations to date, power has become unreliable and expensive.
A strong argument can be made to keep the entire power generation and distribution infrastructure firmly in government hands. Basic economic theory postulates that investors who buy an asset have a single objective and that is to maximise their return. In the power sector this will inevitably translate into higher prices for the consumer. And in a poor country - like Pakistan - the higher price can mean a choice of sending one’s children to school or paying the electricity bill.
On the other hand the government is not looking for a profit. Its objective is, or at least should be, public service: Providing power to its people reliably and at a rate that they can afford. Even if this means selling the power below the cost to produce it. The operative word here is ‘subsidy’. And this word is anathema to the highly paid professionals of the IMF and World Bank. They work tirelessly to obliterate it around the world. In the end it is the poor who pay a price they cannot bear. The fact is that the use of subsidies is a vital tool in the government’s tool kit. Used with precision and skill, subsidies can be a force for development, growth and well being.
Implicit also in justifying privatisation is the assumption that government organisations cannot be managed well. There is no reason to accept this assumption as valid. WAPDA for many years was an extremely well managed organisation. The same can be said of many public sector organisations. Even, believe it or not, PIA was an award winning airline. The rot set in when corrupt, incompetent governments took office. It is not that public sector organisations are organically immune to good management. They can be managed well when there is a will and commitment to do so.
The government has certain basic obligations towards its people. One of these is to provide essential services such as power, gas, water, mass transit, schooling and health reliably and at affordable prices. It is unacceptable that when it fails in these obligations it attempts to escape its responsibility by privatising organisations tasked with providing these critical services. Any government which responds thus does not deserve to be in power.
The writer is Chairman of Mustaqbil Pakistan