Red tape nightmares

The government places too many bureaucrats in charge of what companies can and cannot do.

Complexity is not always a vice, but in the case of government regulation, it often is. In Pakistan’s industrial and energy policy, it is nothing short of a nightmare and often results in situations that are highly damaging to the economy. A classic example of this is the annulment, by the Supreme Court, of the agreement between the Associated Power Generation Company and Wapda. The agreement allowed Associated Power to lease the 150MW Lakhra Power Station in Dadu, one of the very few coal-fired units owned by the government and one that had been shut down for several years owing to the government’s lack of capacity to run it efficiently. Associated Power leasing the plant from the government would have been a win-win situation; for the government, the company and the economy. The government would get revenue from an asset that is not currently being used, the company would be able to make a profit by selling electricity, and the economy would benefit from cheap electricity being supplied to the national grid.

The agreement, however, appears to have fallen afoul of the law. While there are those who will be tempted to blame the Court for this decision, we see no reason to doubt its wisdom. In any case, the fault lies with the energy regulation system. The government is involved in too many places and places too many bureaucrats in charge of what companies can and cannot do, creating both the opportunity and the motivation for corruption to arise. Perhaps, Associated Power is not quite innocent in this whole matter. And if there has been any wrongdoing on its part, it should be held accountable. But even if there is a successful prosecution and conviction in a corruption case, that will still not change the fact that a 150MW coal-fired power plant is lying idle at a time when Pakistan is desperate for sources of cheap electricity. The solution to the problem is not simply prosecution, but a simplification of the law. That is a task not for the courts, but for parliament.

Published in The Express Tribune, August 26^th, 2013.

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