Pakistan inherited a tiny but transparent power sector from the British. It was operated mostly by the private sector. Power theft was unheard of.

At the time of independence in 1947, total power generation in what is now Pakistan stood at 61 MW. It now exceeds 33,000 MW. Access to electricity was clearly a privilege, not a right. On the other hand, the tariffs were affordable. Power generation at that time was dominated by the private sector. Karachi received power from privately owned Karachi Electric Supply Company. There was a power plant at Chaman and another at Peshawar. The Campbellpur Electric Supply Company was part of Rawalpindi Electric Supply Company. The Multan Power Supply Company was operational. Together these companies produced 61 MW of electricity.

The situation changed drastically after the commissioning of Mangla Dam and then Terbela Dam, both built by the state using World Bank loans. Power generation suddenly jumped from a little over 150 MW in 1965 to over 3,000 MW in 1973. The government then became the dominant supplier of power in the country. The power sector was developed and financed from the national budget and the tariff was determined on the basis of the cost of production. The cost of financing the construction was not recovered from the consumers. This proved an unsustainable model.

Another largely overlooked fact was the consumption pattern. Power distribution companies continued to install transformers etc based on sanctioned load in that area. The sanctioned load of almost 80 percent of the households was much less than the actual consumption. It is common knowledge that few households had air conditioners five decades ago. A large number of middle-class families now use air conditioners in summer. Washing machines, particularly automatic washing machines, were also rare in the 1970s. Today, they are a common feature in urban houses. The microwave oven is another addition to power consuming gadgets. With increase in electronic gadgets the actual load has grown. Only a fraction of the consumers informed the electricity distribution companies about the load increase. As a result the sanctioned load remained unaltered. It was left to the distribution companies to upgrade the transformers after complaints of frequent shutdowns due to overloading. The distributors still lack accurate data on the power load needed in the areas they serve. This results in erratic supply and frequent damage to power supply equipment.

The impact of power load changes can be judged from the fact that in 2010 it was calculated that the charging of mobile phones alone consumed 62 MW. Former PEPCO chairman Basharat Ahmad Cheema estimates that after the staggering increase in mobile phone use, the current use on their charging is nearly 200 MW. The regular increase in power demand was not matched by increases in power generation capacity.

The state eventually added some furnace oil-based plants to overcome shortages but that was not enough. Meanwhile, the government finances came under severe stress, and it was unable to add further generation capacity from its resources. Then came the independent power producers. To attract investment in power production the state guaranteed that their entire output would be purchased at a fixed rate of return. The tariffs agreed with sovereign guarantees were front loaded to cover the financial cost of the projects plus the profit. The guaranteed rate of profit on investment was over 18 percent (more than the interest paid by commercial banks on fixed deposits). The tariff was fixed in US dollar terms. This meant that with every devaluation of the rupee the tariff in rupee terms would rise.

Until 2000, the power sector was managed by the Water and Power Development Authority. It had 147,000 employees out of which 9,250 were highly qualified professionals. In 2000, the power division was separated and reorganised into several power distribution companies looked after by Pakistan Electric Power Company (PEPCO). The professional staff was not transferred to the distribution companies. The professionals had been dealing with the problems faced by the consumers and suggesting remedial measures for upgrading the system. The distribution companies lacking the professional resource were unable to resolve the issues and regular upgrades were also missed. In the meantime, the power tariff was rising on a regular basis.

The consumers were not prepared to bear the high increases in tariff. This gave rise to power theft which increased with every increase in power tariff. The theft requires connivance of the staff of the power distribution companies. Every increase in power tariff also increases the income of the corrupt officials. Those consuming stolen power consume it lavishly since all they pay are nominal bills and some bribes. In some areas of the country power theft enjoys political patronage. The theft is accounted for as distribution losses which are among the highest documented in the world. In addition, the distribution companies have been unable to recover power bills worth Rs 1.6 trillion. Defaults by the private sector are worth over Rs 1 trillion. Public sector departments too owe Rs 600 million to the power companies. Why the private sector default was permitted to build while supply continued uninterrupted is a mystery.

Today, power theft is a nationwide issue. The losses in KP, Balochistan and Sindh have increased further after the recent increases in power tariff. In 1990s, the largest theft fraction in the country was recorded at Kasur. While KP and Sindh have higher percentage losses, Lahore Electric Supply Company still has greater absolute numbers than Sindh, Balochistan, Azad Kashmir and Gilgit Baltistan. It is because of the power theft and non-recovery of 10-15 percent bills that the state is unable to recover the cost of power. It regularly defaults on payments to the independent power producers despite the sovereign guarantees given to them.

It must pay whenever they call the sovereign guarantees. The government seeks shelter against these payments by directing public sector companies like the Pakistan State Oil, the SSGDC and the SNGPL to supply fuel to these companies without waiting for payment. Their dues are released by the IPPs when the government releases some payment to them. These public sector companies have thus accumulated acute financial problems. The so-called circular debt in the power sector has crossed Rs 2.6 trillion.

The idea that hydel power is cheap is false. The tariffs for electricity produced by Mangla and Tarbela dams did not factor in the cost of construction of those dams. Hydel power is good in that it does not pollute the air, but it costs almost the same as LNG- or coal-powered generators. The tariff for electricity produced by Basha-Diamer Dam was calculated in 2009 to be Rs 8.56 per unit based on its construction cost. In 2021, after the estimated construction cost escalated it came to Rs 14.50.

All efforts over the past decade to revamp the power distribution companies have failed. The boards of these companies are appointed by the state. Sometimes the appointments do not follow transparent merit. Privatisation is a potential solution but does not guarantee the availability of power to all consumers. A possible interim solution is to keep these companies in the public sector and handover their management to the private sector in the interest of transparency and eradication of theft and corruption.

The writer is a staff member of The News International