Power Sector Reforms

Concluding his week-long visit to Pakistan, the World Bank’s VP South Asia, Hartwig Schafer has emphasised that it is crucial for Pakistan to stay the course on the structural reform programme launched by the government. The VP stressed on the power sector in particular, as he urged the government to accelerate the pace of reforms which are critical for achieving higher growth and resilient recovery from the Covid-19.

While the World Bank’s assessment regarding the urgency for reforms is on the money, the nature of those reforms must ensure that they benefit Pakistan and its citizens. There is no doubt that the power sector must be on a financially viable footing to support Pakistan’s green, resilient and more inclusive development. Nonetheless, the reforms in the power sector cannot be instituted at the expense of the final customer, as the IMF has been suggesting.

The issue of ballooning circular debt has been plaguing us for far too long. The current government had committed to bring the circular debt to zero by December 2020, but it still remains over Rs2.3 trillion despite a massive increase in electricity prices.

The SAPM on Energy, Tabish Gauhar has rightly pointed out that holistic and structural reforms are needed to tackle energy sector challenges. Meaningful reform in the power sector can only come about by undoing the distortions present in it. This would involve making power companies reduce their transmission and distribution losses, revise tariff setting mechanisms, renegotiating deals with IPPs, cutting down on power theft and ensuring that government organisations foot their own electricity bills. Additionally, given the risks posed by climate change, reforms should also include a switch to cheaper alternative sources of energy such as wind and solar power. The growing circular debt is a continued threat for the economy and if structural reforms are not introduced at the earliest, the future of the energy sector will remain at stake.

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