Power sector: corruption and inefficiencies

According to newspaper reports, the cost of five small dams with a combined generation capacity of a mere 9.5 MW has risen by 180 percent in one year: from 35.6 billion to 100 billion rupees. A Planning Commission official hastened to add that the federal government has released no money for any of these five dams, therefore, technically, there has been no corruption.It was also revealed that the Deputy Chairman Planning Commission Nadeemul Haq chaired a meeting to discuss the cost escalation and decided to ‘rationalise the costs.’ What is unfortunate about this entire episode is the fact that the decision to rationalise the massive and indeed alarming cost escalation, because of its sheer scale, was not taken because of internal checks and balances in either the relevant ministry or indeed at the level of the Planning Commission but was taken subsequent to concerns voiced by the Friends of Democratic Pakistan (FoDP) when these projects were shared with them. There are reports that the FoDP, already reluctant to disburse the pledged assistance, would now have yet another arrow in its arsenal of concerns with respect to poor governance in this country.

At the same time it was startling to learn from Pepco’s counsel during the Supreme Court deliberations on the controversial rental power plant (RPPs) projects that at a cost of 18 billion rupees, only 90 MW of electricity has been produced at the rate of 14 rupees per unit in one and a half years. This poor output as a consequence of a considerable investment must be taken in the context of serious reservations against the RPPs that were highlighted in the third party audit report. The resulting recommendations of the audit report included the need to focus on operating at full capacity, which would entail eliminating the inter-circular debt and enhancing generation exploiting cheaper inputs like water (through building dams) as well as coal.

In addition, the federal government changed the terms of reference by increasing the 7 percent advance to 14 percent at a later stage – a decision that blatantly violated the PPRA rules. In this context, the only conclusion would be to urge the government to revisit its focus on RPPs as a means to deal with the energy shortfall in the short-term. It must be borne in mind that energy is an important factor contributing to the cost of production of goods and services. A high cost of energy will not only render our goods and services uncompetitive in the international market and adversely hit our exports, but will fuel inflation, which is already back breaking, within the country leading to further unemployment and misery for our citizens, particularly the poor and lower middle class.

At the risk of belabouring the obvious, the government must not merely focus on rationalising the cost of the five dams while continuing to ignore all criticism of the RPPs based on a third party audit. That would merely create the perception that there are no internal control mechanisms in the government departments/ministries and action to stop the projects is taken only when external investors or the media highlights corruption.

Thus it is critical for the government to apportion blame where it resides, with the private sector contractors, then those contractors need to be blacklisted and barred from future government contracts and where there was complicity with state actors, as there must be in these cases, the relevant individual, be he an official or a minister, must lose his job/portfolio – Brecorder