Control over energy sector: When all of us are weak and poor, we need more cooperation

Cooperative federalism has merits where strengths, weaknesses are shared

SYED AKHTAR ALI January 29, 2017
K-P nationalists argue that hydroelectric power costing Rs3 (earlier Rs1) is taken from them, although not exactly as Tarbela and others are all federal investments, and resold at Rs10. PHOTO: FILE

ISLAMABAD: Sindh Chief Minister Murad Ali Shah has warned Hesco, Sepco and Wapda to either pack up or stop the disconnection operation. The Sindh government could handle its electricity sector itself, he said.

It is not for the first time that a chief minister of a province has expressed the desire for autonomy in the electricity and energy sector as a whole. Similar statements have been issued by K-P on issues related to tariff, hydel royalty, autonomy, etc.

Excessive centralisation and preponderant role of Punjab led to the passage of 18th Constitution Amendment. There are people who are not satisfied with implementation of the amendment and would like to expand its scope. There are others who have doubts whether the amendment has been successful in delivering the provinces what was expected from it.

It is true that there are capacity issues in the provinces. It is said that problems of democracy can be solved with more democracy. In the same way, the proponents of autonomy and decentralisation argue that failures cannot be made an alibi to wind up or dilute the process of decentralisation.

Albert Einstein says: “Life is like riding a bicycle; in order to keep the balance, one must keep moving.” So let us see how can we move in this issue without falling down on either side.

Govt control

We are a federation like the US, Canada, Australia and Germany with a difference that the US has a presidential system while all others including India and Pakistan are parliamentary systems.

In developed countries, the confusion and controversy over federalism and self-control are much less limited due to the role of the market. Electricity generation, for example, is out of government control – federal or provincial.

Transmission and inter-state trade is normally under the federal control. Provinces can have provincial transmission under their control as well. Distribution is almost everywhere under provincial or even local government control.

However, federal or provincial control in market economies does not mean ownership and management also. Companies normally own and operate the facilities but the regulation is with government only.

The problem becomes much more complicated in countries like ours as well as India, where most of the electricity sector is owned and operated by governments. When it is the government, there is this controversy of federal or provincial.

Cooperative federalism

In Pakistan, we have a cooperative federalism. We do not leave the provinces on their own, but share the burden of each other.

For example, there is one price of petrol or electricity from Karachi to Chitral. In other commodities, such as fertiliser and wheat, perhaps, there is a somewhat similar system. This has a lot of merit and has served us well, although the WTO might disagree.

Pooling has its problems as well as being seen in the electricity sector which is beset with the problems of losses such as theft and receivables. In Punjab (except for Mepco whose losses are 20%), the losses are generally around 10%, while in all other provinces, the losses are in the bracket of 25-35%. In a way, Punjab subsidises the other provinces.

However, things are more complicated than this. Hydroelectric power of K-P is cheaper and also gas-based electricity of Sindh and Balochistan.

K-P nationalists argue that hydroelectric power costing Rs3 (earlier Rs1) is taken from them, although not exactly as Tarbela and others are all federal investments, and resold at Rs10. However, if you ask them, as to what would they do in winters, when there is no hydel electricity, they would have no answer.

Power is a capital-intensive sector. A lot of external political issues influence this sector. It is highly unlikely that provinces alone would have the wherewithal including finance, management and other resources to go alone in this sector. Look at Thar, despite Sindh’s successful struggle to gain full control, the coal and power project took so much time. Federal guarantees had to be given despite a 49% private equity and a higher tariff.

All other Thar projects would come under CPEC, otherwise, there would be no other possibility.

Also the federal government would have to restrain Punjab from installing imported coal power plants. If not, where would the Thar electricity go. Where is the market and who would invest in Thar.

So, there is merit in cooperative federalism of sharing strengths and weaknesses and opportunities and threats. Especially, when all of us are weak and poor, we need more cooperation.

The federal government in the past has offered to the Sindh government to take control of electricity distribution and even Pakistan Steel. Interestingly, the wise men of Sindh only want to have management control and do not want to bear the cost. Smaller provinces should stop acting as free riders and cooperate with the federal government in reducing losses and theft. All are involved – poor and rich, and private sector and government departments.

These losses cannot be reduced by active cooperation of the provincial governments. In smaller provinces, and to some extent in the large one as well, it is often difficult for the governments to take action against the powerful, both rich and poor.

Thus, a wiser approach would be to let the distribution companies continue with their campaigns and indulge in lip service to support the locals. I hope Murad Ali Shah is doing the same.

However, in the long run, all provincial governments may consider alternative models, where there is larger provincial role in the electricity sector and do a cost-benefit analysis.

We should try to improve on the current system by improving the operations of Council of Common Interests, while the federal government should take steps to reduce the influence of Punjab government on its determinations. Justice must be done and it should appear that justice is being done.

The writer has until recently been member energy of the Planning Commission

Published in The Express Tribune, January 30th, 2017.

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Imtiaz | 4 years ago | Reply A very well written and balanced article. The 18 amendment made Pakistan the only country in the world without central ministries of health, education, agriculture, environment etc. It has gone too far and made Pakistan ungovernable.
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