Pakistan Power Sector Crisis Exposed: Nepra Report Slams Poor Governance

Nepra noted that distribution companies continued to suffer from poor governance with transmission and distribution losses exceeding allowable limits, low bill recovery and load-shedding based on Aggregate Technical and Commercial losses.

Reference was also made to Debt Service Surcharge sourced to poor governance of the power sub-sectors that accounts for higher utility tariffs with industry lamenting the fact that cross subsidies have made the cost of energy as an input into their production process much higher than the regional average, which is the reason behind the decline in exports. Circular debt has also risen.

"The report undermines Prime Minister Shehbaz Sharif's repeated appreciation of the power sector team that perhaps prompted the Federal Minister for Power Awais Leghari to publicly reject the report maintaining that it is based on incomplete and inaccurate data which has led to widespread misunderstandings," according to an article in the Karachi-based Business Recorder.

The government, Sharif said, is embarked on a six-year programme to completely eliminate circular debt which includes cancellation of 8,000MW costly projects that saved the country $17 billion (a saving that is not realised because the project never got off the ground) and to exclude commercial losses-based load-shedding was incorrect.

It has been widely reported that the government has taken 1.25 trillion rupee loans from the commercial banking sector at rates below the amount parked in the Holding Company, given the decline in the discount rate from 22 per cent in 2022 to 10.5 per cent today.

Borrowing at lower rates to retire previous loans incurred at higher rates is welcome, though ignored is the fact that borrowing that reflects poor performance and is to be payable by the hapless consumers is hardly likely to provide a comfort level to the general public, the report points out.

The Power Minister lamented the fact that Nepra did not take into account the data provided by his Ministry - a claim that is baffling given that regulatory authorities, like Nepra and Ogra (Oil and Gas Regulatory Authority), are set up to protect the consumers and not to synchronise their data with that released by the political government. Additionally, regulatory bodies safeguard public welfare and ensure quality product service while preventing fraud and anti-competitive practices, the article observes.

Regulatory authorities provide crucial benefits by safeguarding public welfare through consumer protection, ensuring product/service quality, promoting fair competition, preventing fraud/anti-competitive practices, and establishing clear frameworks for industries, leading to greater trust, market efficiency, innovation, and economic stability.

It is, therefore, very concerning from a consumer perspective that the government has reportedly finalised amendments to the Nepra Act 1997, aimed at making Nepra subordinate to the Power Division - a report that has not been denied by the government to date, the article points out.

Moreover, regulatory bodies like Nepra perform a very critical function and must be allowed to continue to protect consumer interests. The incumbent government's muzzling of several entities tasked to provide a service to the general public through legislation must be abandoned in favour of a more open and participatory discharge of functions that can lay the foundation of a system capable of evolving into one where borrowing would no longer be required, the report added.

- IANS