By Mian Majid Ali Afzal
Looking at the vast and rather chaotic picture of Pakistan’s energy sector, one must admit that the potential to achieve real efficiency and focus on sustainability has not yet been identified. This potential is best achieved by readjusting the payment system for power providers, especially Independent Power Producers (IPPs), from a capacity-based to a performance-based system. Therefore, how this article presents performance-improvement advice from within the sector indicates that improvement can directly lead to a corresponding increase in capacity and, specifically, to the stability of the entire country’s energy supply.
In essence, one can locate the main source of the energy crisis in Pakistan in the outdated structure of the contracts signed with IPPs. Apart from this, the provided contracts had been based more on the capacity that IPPs contracted to deliver, as opposed to the amount of electricity actually produced. This frequently results in conditions where the costs of doing business and managing finances are poorly aligned and are generally suboptimal. Understandably, the Pakistani government realized this in 2021 when it started engaging in the process of rebidding with 47 IPPs to shift the negotiation’s focus from capacity to performance. These renegotiations are expected to result in the cut of government spending to a tune of as much as PKR 836 billion in the next decade. This shift is not merely cost-driven; it is the shift toward a system of rewarding activity that encourages guiding guidelines toward performance and promising payoff, so to speak, innovation and efficiency instead of potential accumulation.
In addition to the contractual issues, corruption, which permeates from the top managerial echelon to the grassroots level, significantly jeopardizes the sector’s viability. Mitigating this rank system mentality is perhaps the most important prerequisite to any meaningful change. To this end, the government needs to apply increased pressure on relevant bureaucracies, demanding enhanced transparency and accountability to admit only honest and competent personnel at all levels. Polls to decentralize the powers of the bodies and include a section on combating corruption are crucial to foster organizational integrity in the sector.
The role of private partners for revamping the energy sector of Pakistan cannot be ignored at all. This has been embraced massively due to its efficiency and willingness to take risks, hence improving the segment which was previously marred by bureaucratism. More private investment should be promoted, especially in installing the factories making the renewable energy sources, thus experiencing an increased speed of the shift to a more sustainable energy model. The case studies of private partnerships present comprehensive proof that more positive changes can be effected in service delivery and operation when the private sector’s energy is properly channeled.
All forms of inefficiency crop up in different ways, ranging from political influence to enlargement of management structures, which not only slow down operations but also drain resources. The possible improvements of streamlining these processes and the elimination of such offices are inevitable activities needed to improve this sector. Also, increased government control over DISCOs (Termites) to counter energy theft – a menace that loses the sector about 590 billion PKR annually – could tremendously enhance corporatization along with operative performance. DISCOs require this freedom to introduce drastic measures that help to address their issues without interference from outside sources.
Sustainable solutions like the use of solar power can significantly minimize the use of conventional power sources, as seen at the government’s soft institutions, hence reducing operational costs. This not only helps in attaining sustainability objectives but also sets a standard that can be practiced with the facilities available in the modern world of energy creation and transmission. Updating such networks, like cables, is also important, as most of them are old and have been in operation for several years. These modifications help make the operations more efficient, whereas the constant losses caused by the outdated and broken equipment are no longer a problem.
Most policies culminate in failure because they are developed with a lot of distance from those who implement them, i.e., the field staff below gazette grade. For example, the introduction of an online system for meter reading was counterproductive because researchers realized that the idea was inapplicable in the field; this shows the depravity of policy and practice. To make efficient policies, necessary inputs from field officers and technicians who are involved in handling various problem areas and working environments of the energy sector must be taken.
Besides valid reasoning, the interviews and narratives of the employees in the energy sector also revealed the relationship between performance and capacity. Thus, by tying rewards to results, reducing corruption and embezzlement, embracing private sector solutions, and adopting efficient operations management, the energy sector in Pakistan can be improved significantly. It is clear that the accomplishment of these reforms will not only increase the performance of the sector but will also increase its capability of meeting the increasing energy needs of the country for the benefit of future generations. This story also correlates with the need to change the payment mechanism of IPPs and highlights the essence of such transformations – making the energy sector in Pakistan more effective, reliable, and sustainable.
The writer is the author of “The Reforms” and serves as a Strategic and Administrative Adviser on South Asia Affairs for a CPEC-based project in Islamabad. He is also a Strategic Communication Adviser at the Institute of Strategic Communication & Economic Studies (ISCES). He can be reached at mianmajid582@gmail.com