FRIA wants drastic measures as hike in tariff fails to control circular debt



LAHORE: The Ferozepur Road Industrial Association (FRIA) senior vice chairman and PIAF senior leader Shahbaz Aslam has stressed the need for overhauling the power sector through some drastic measures as the abnormal hike in base electricity tariff and the anti-theft drive have failed to control the power sector circular debt or the losses of distribution companies which have been increasing.

The prominent business leader and PIAF EC member said that power sector circular debt has climbed to Rs2,611 billion, while the losses by the distribution companies have enhanced by 26.22 percent to Rs77 billion.

Shahbaz Aslam said that total cost of inefficiencies in the power sector is estimated at a whopping Rs9.6 trillion during the last one and a half decades.

The FRIA Senior Vice Chairman stated that the circular debt stock has crossed Rs4 trillion after Rs400 billion were added to it during the last fiscal year. He said that in present scenario the energy efficiency and conservation are key measures used by countries across the globe to mitigate associated risks. However, in the case of Pakistan, both energy efficiency and conservation were generally treated as alien concepts. He noted that there was an urgent need for upgradation of energy efficiency and conservation standards and strict enforcement, besides replacement of inefficient appliances and consumer awareness for responsible use of energy were other key areas which should be identified for action as a national priority. He estimated that a dollar outflow of around $ 1.25 billion could be potentially saved annually through implementation of efficiency and conservation measures. He pointed out that the line losses ran as high as 9pc over and above the percentage allowed by NEPRA. He informed that theft and line losses should be addressed through advanced metering and cabling. Economy has been under adverse external conditions, due to spillovers from the war in Ukraine, and domestic challenges, including from accommodative policies that resulted in uneven growth. Steadfast implementation of corrective policies and reforms remain essential to regain macroeconomic stability, address imbalances and lay the foundation for inclusive and sustainable growth.

Efforts to strengthen the viability of the energy sector and reduce unsustainable losses are also essential. Further efforts to reduce poverty and protect the most vulnerable by enhancing targeted transfers are important, especially in the current high inflation environment.

He said that Pakistan, being a net importer of energy resources, was facing serious supply-side challenges, as the global price of crude oil and imported coal had witnessed a continuous rise, leading to a significant threat to country’s energy security.

Shahbaz Aslam said that the sector needs to be deregulated in letter and spirit, as nothing can work unless the DISCOs are truly empowered and allowed to act independently. He pointed out that the power sector has been suffering from miss-governance, lack of DISCOs’ competence and missing coordination between the generation and distribution systems.

The sector alone can drag the economy down to an abyss unless it is resolved. And for that to happen, nothing short of deregulation and privatization will work, as successive governments have used the energy sector for their political gains by taking decisions that have resulted in unabated rise of circular debt.

So, the government will have to review the situation holistically with a mandate to consider and recommend measures to be taken for conservation of energy.

The FRIA SVC said that the government is not ready yet to undertake structural reforms related to circular debt and management of state owned enterprises.