Power sector experts have expressed serious concerns at the resurgence of a crisis that was first evident in Pakistan in 1994, subsequent to the award of contracts to Independent Power Producers (IPPs) by the Benazir Bhutto government - at lucrative tariffs with the added financial incentive that the government would pay for capacity output or, in other words, even for idle capacity. During the third ongoing tenure of the Nawaz Sharif administration high tariffs are again making investment in the power sector extremely lucrative but, at the same time, given that official documents reveal that generation would outpace demand by the end of October this year the government would be required to pay for significant idle capacity. By March 2018, demand is projected at 19,300MW while available capacity is estimated at 27,500MW, and therefore the government would be required to pay for an additional 8,200MW that it does not purchase - the capacity demand shortfall.

Additionally, official documents also indicate that the LNG deal struck with Qatar has a clause which guarantees payment for a specific quantity of LNG imports within a stipulated period that Pakistan may not be able to utilize given the lack of LNG supply infrastructure. The reason is the failure to commission RLNG-II pipeline due to the failure to complete the 400-metre section in Jamshoro which passes through the property of Mr Shoro who has refused permission to Sui Southern Gas Company Limited to complete the project. This refusal makes it impossible to transport 1.2 billion cubic feet per day to Sui Northern Gas Pipeline Limited. These concerns were brought to the attention of the Cabinet Committee on Energy headed by the Prime Minister; however, disturbingly the meeting ended without a viable strategy to resolve these critical issues that would not only place a burden of higher tariffs on consumers but also be a drain on the public exchequer.

In this context, it is relevant to note that the Sharif administration has third time around shown a marked tendency to undertake power projects without taking account of serious bottlenecks in the system that include contracts that benefit the seller at the cost of the purchaser, which in this case is the government of Pakistan. This accounts for periodic recommendations by the Ministry of Water and Power to raise tariffs to absorb the additional costs - recommendations that were more often than not challenged by the regulator National Electric Power Regulatory Authority (Nepra). The government's decision to bring Nepra under the control of the Water and Power Ministry through the issuance of a second notification on 6th June 2017 is thus being seen by several sector experts as a means to ensure that the Ministry's recommendations with respect to tariffs remain unchallenged.

There is also the issue of a transmission system that is unable to transport more than 16,500MW of electricity. This implies that the Sharif administration has not sequentially developed projects that would have ensured, first and foremost, that the network has the capacity to transmit the available capacity and second that the infrastructure network has the capacity to transport RLNG to the power stations to generate electricity. Clearly, there appears to be lack of consequential thinking with respect to project selection and implementation on the part of the government which would be at the cost of the taxpayers - both in terms of budgetary allocations to meet the contractual obligations to purchase capacity power rather than actual power purchased and in terms of higher payment for electricity that would in turn negatively impact on the country's productivity and on exports.

To conclude, there is a need for politicians to allow sector experts to undertake feasibility studies independently and not, as has been witnessed in several instances, compel the experts to provide data that would allow the government to construct mega projects with political overtones.

Copyright Business Recorder, 2017