The rudderless energy sector – Opinion


The country’s print media this week reported on the current situation in the country’s energy sector, exposing how the sector has slipped. Some developments are rather very concerning, including:

– “Large Taxpayers Office (LTO), Karachi seized all bank accounts of Sui Southern Gas Company Limited (SSGC) to recover Rs 23 billion pending sales tax from which the tax department had successfully recovered Rs 312 million through seizures of bank accounts.

– “The National Electric Power Regulatory Authority (Nepra) on Wednesday rejected a request from electricity distribution companies for the transfer of the Rs 28 billion load to electricity consumers due to quarterly adjustments and asked the petitioner to resubmit the data as Nepra doubted the accuracy of the data provided.

— “M/s Pak Matiari-Lahore Transmission Company (Private) Limited (PMTCL) has approached key authorities of the Federal Government to obtain clearance for the payment of the pending transmission service in the amount of Rs 12 billion for s to meet debt service and other financial obligations.

– “The National Electric Power Regulatory Authority (Nepra) failed to determine the financial impact of the quarterly adjustment of the first quarter (July-September) of the financial year 2021-22 due to “imperfect” figures presented by both the CPPA-G and the distribution companies (Discos).The case manager informed the participants that a hearing was held on January 22, 2022 on the QTA of the first quarter of the 2021-22 financial year in which Discos had requested a positive adjustment of Rs 17.851 billion but the Authority postponed its decision, after Central Power Purchasing Agency-Guaranteed (CPPA-G) raised doubts about the authenticity of the data submitted by Discos.

When the hearing began this week, Nepra’s tariff department team noted that nightclubs had massively changed their claims and apparently a “confused” adjustment had been requested, which would affect different categories of consumers.

SSGC, not so long ago, was a blue chip company providing a healthy dividend to its shareholders and a large income to the country. It is unimaginable that he could become technically bankrupt.

In the context where Nepra doubts the data provided by CPPA-G and Discos and, in turn, CPPA doubts the data provided by Discos, the fairness and justification of the amount transmitted to consumers to compensate are unacceptable.

It is now normal practice for contractor payments to be withheld and for projects to be delayed. Chinese contractors have repeatedly raised this issue at the highest level with our and their government, which has led to bitterness and suspension of work.

Business in the country’s energy sector is chaotic indeed. It’s no surprise that tariffs need to be increased every few months to calm the chaos and keep the system running and prevent it from collapsing.

What is of most concern is that there are no viable solutions or strategy on the table to seize the sector and set it on the path to reform. The energy managers, the ministry and the regulators combined do not know how to go about it. Professionals brought into the system to seize the industry and run it have failed – one after another. Now it’s a status quo.

The governance model of the energy sector with its dual control by the ministry and hired professionals in the form of corporate CEOs and advisers is flawed and unworkable.

The interests of the two are diverse, their mode of governance is different and their motivation to deliver on the ground is contradictory. Those in charge of business must bring about a radical change in the governance model of the sector. This means that the ministry is totally “OUT” and the professional managers are totally “IN”. It’s a Herculean task, but the only option left to save the country’s collapsing energy sector.

(The author is the former president of the chambers of commerce and industry of foreign investors)

Copyright Business Recorder, 2022


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