The Pakistan Electric Power Company (Pepco) has been revised under a legal arrangement of being a “Managing Agent”. The role of Pepco, briefly speaking, is to monitor and coordinate the operations of DISCOs.
There is a mixed reaction to the revival of Pepco. I am in favour of Pepco’s revival and have been writing about it. We will explain the reasons for such support while examining and evaluating the objections of those opposing it.
Pepco had been formed in the wake of the dismemberment of the monolith of Wapda which used to control the whole electricity sector, as a part of the electricity reform process leading to commercialization and competition. This led to the formation of many organizations like NTDC, DISCOs, Gencos, CPPAG, NPCC and eventually private sector IPPs. More fractionation is expected while we move towards a competitive market. Wapda continues to operate as an independent entity dealing with hydropower and water, while the PAEC continues to be active in the nuclear power and fuel sector.
Pepco was, however, almost dissolved except in legal terms, largely as a consequence of power politics between DISCO management and Pepco. A new ideology and utopia emerged of autonomy and independence of DISCOs under an independent board of directors (BoD). By now, the honeymoon period of BoDs has also ended. Different boards have been tried and tested in the meantime and could not deliver the expected results. It was a wrong expectation ignoring the ground realities. These boards could not attract professionals in a significant number to be effective, nor was any serious effort made to induct them.
Political and other influences largely influenced the formation of boards of directors. Even if the boards were totally composed of professionals, it was a bit too much to expect that they would be able to handle the kind of issues the DISCOs were facing; T&D losses, receivables, etc. What can a two-hour meeting in a month do in terms of guidance and effective over-sight? Boards of directors have their role of oversight of a limited statutory nature. In any case, the boards did not enjoy much power; effective control and coordination has been vested with the Ministry of Water and Power and now the Power Division.
The Ministry of Water and Power and later the Power Division tried to do what was neither expected of them nor were they capable of doing it. They did not organize the ministry as the Ministry and division of petroleum did. They have several directorates general for Oil, Gas, Policy, Concessions etc. Consequently, the rationale and justification for the revival of Pepco has emerged.
Apparently, the Ministry of Water and Power/Power Division seem to have supported it. It is their greatness that they have allowed it. And, there appears to be an all-around consensus. A lot of power will still remain with the ministry, but involvement in day-to-day affairs and operational matters is expected to go away due to the intermediary layer of Pepco.
Pepco should not be considered an unnecessary burden. Even private groups have group/head office teams meant for monitoring and coordination of the constituent companies despite individual companies’ boards of directors. While there is merit in the autonomy and independence of individual operating companies (DISCOs), there is an equal need for knowledge and experience sharing; pooling of resources and what is called critical mass. Nuclear reaction and release of energy (for that matter organizational reaction and activity) takes place when there is critical mass.
In this process of a march towards commercialization and the heavy involvement of IFIs, what has suffered most is technological development and indigenization. Aid or loan agencies have discouraged local capacity building and have promoted international competition which has helped expand the market of international companies and discouraged local companies and technology development of the country. Even under CPEC, which is supposed to be a benign arrangement for the mutual benefit of the two brotherly countries, local companies and technology development has suffered. China has changed from the times when it built HMC, Railway Carriage Factory and other enterprises. Part of the fault lies with our institutional decay and decomposition.
We have been following a Western model or no model at all. In the West companies like GE, Boeing, Microsoft and the like which pool up the technology and have the global market share to provide for the technology development. In small and underdeveloped countries, companies are too small to cater to the requirements of the national technological base. Institutions or institutionalized companies ought to be there, in our case, to achieve this. Even NASA had to be made and supported by the US to be able to compete in the domain of space and space craft and communications. China has managed to compete with the US and others in the area of steel, chemicals and others due to institutional support and critical mass approaches.
Pepco (and other companies) can do this, beyond operational issues. Turkey and India have done it and now their technological level is much higher than that of Pakistan. Let us forget comparing ourselves with Korea, China and Japan which had identical per capital income in the 1950s. Malaysia, Indonesia and even some Arab countries are moving ahead. All local contracts, even of garbage picking, are going to foreign companies resulting in a drain of foreign exchange and lost opportunities for the development of local know-how, organizations and companies and technologies.
More than 10,000 MW of generation capacity projects have been added but there was no involvement of local companies except for petty contracting. The Heavy Electrical Complex (HEC) is bankrupt without orders and nobody is willing to buy it. Liberalizing policies over the last more than two decades have only increased imports and haven’t caused any meaningful increase in exports. Over the last more than two decades, Pakistan has stagnated technically and technologically. This cannot continue without causing permanent damage to our sustainability and economic survival.
In this broader context, and less broad sectoral perspective, Pepco should do more in the area, promoting and accumulating technology and indigenization in its specialized area. The Pepco leadership and the Power Division should study the model of the CEA (Central Electric Authority) of India. And strengthen its technical sections on the model of the CEA. One may consider placing GENCOs under control of Pepco; currently, they are being controlled by the Power Division directly under the garb of independent boards of directors.
CEA India is practically a technical arm of the power sector of India. One could suggest a separate organization on the model of CEA India in order to please and satisfy those who wouldn’t like revival and expansion of Pepco. We would like to, however, suggest the building of a critical mass, as discussed earlier. There are people who may be concerned about the cost aspect.
Induction of meritorious people assisting in developmental and operational aspects results in short- and long-term visible and invisible savings. And people are sceptical that induction of talented people wouldn’t be there and hence their opposition to the proposal that has been discussed in the foregoing. However, let us be positive and hopeful that this time Pepco will not disappoint us and will be able to deliver much more than what has been charted for it by the mandarins.
The writer is a former member of the Energy Planning Commission and author of ‘Pakistan’s Energy Issues: Success and Challenges’.
