LAHORE - According to Institute for Policy Reforms, the advertisement of Ministry of Water and Power is an incredible distortion of reality. The common perception is that the power sector is in poor state and, if anything, that the performance has worsened. This is manifested first, in the petrol crisis in the beginning of 2015, due to problem that PSO had been experiencing in opening LCs for import. Second, despite a commitment to provide uninterrupted electricity during sehri and iftar in the last month of Ramadan, most areas of Pakistan remained in darkness during these hours. This led to large-scale protests in many cities and towns. Third, there has been a de facto power crisis in Karachi in recent weeks, with many hours of unannounced load shedding daily.

This conflict between claims and perceptions need to be resolved by the use of objective indicators. We first examine the performance in terms of increase in generation capacity. During 2013-14 and 2014-15 (first nine months), the Pakistan Economic Survey shows a cumulative increase in installed capacity of 792 MW. This is equivalent to a rise of only 3 per cent in capacity in almost two years. The failure is attributable to the inability of the Nandipur Project, despite massive cost overruns, to generate electricity and to delays in the completion of the Neelum-Jhelum project. Second, the generation of electricity has actually shown a decline of 2 per cent in the first nine months of 2014-15. This is attributable partly to the shortage of furnace oil in the end of 2014 and beginning of 2015, due to the circular debt problem. In fact, there was a continuous decline in power generation within the Pepco system from September 2014 to February 2015. It is only in the month of May 2015 that a significant increase in power generation has been registered.

The problem of large outstanding circular debt was largely resolved by the PML (N) government soon after it assumed office in 2013 by a massive injection of Rs 480 million into the power sector. But it has come back in a large way during the last two years. PSO’s receivables which had fallen to Rs 76.7 billion by June 2014, rose rapidly to Rs 221.9 billion by end-September 2014. They stand at Rs 175.4 billion, as of the end of March 2015. Among IPPs, the largest entity is Hubco. Its receivables had fallen to Rs 24.8 billion in end-June 2013. They have also risen to Rs 68.8 billion by March 2015. The same pattern is revealed in the case of other entities in the power sector like Kepco, K-Electric, SNGPL, etc. Clearly, despite the Ministry’s claims, the problem of the circular debt has persisted and grown to over Rs 300 billion.

The Ministry of Water and Power’s tallest claim is the phenomenal reduction in load shedding between 2013 and 2015. The best way to gauge this is to see the increase in consumption of electricity per consumer, among different types of consumers. Estimates from Nepra and the Pakistan Economic Survey reveal that the increases have been small from 2012-13 to 2014-15. They are 6 per cent by domestic consumers, 4 per cent by industrial consumers, 3 per cent by commercial consumers and actually a fall of 3 per cent in the case of agricultural consumers. With such small increases it is impossible that load shedding could have come down by 50 per cent in urban areas, by 40 per cent in rural areas and by 66 per cent in industry.

The Ministry of Water & Power must realise that the poor management of the power sector is causing heavy losses to the economy. It has reduced the GDP growth rate by almost 1.5 percentage points annually. Unemployment has increased by more than 1.5 million and exports have been reduced by almost $3 billion. Instead of issuing false advertisements, the Ministry is advised to work intensively to ensure that power load shedding is largely eliminated by the end of 2017, as promised by the Prime Minister.