Spearhead Analysis – 30.01.2017
By Farrukh Karamat
Senior Research Coordinator, Spearhead Research
Rudyard Kipling, in his book Kim, provided a wonderful description of the ‘Grand Trunk Road’:
“And truly the Grand Trunk Road is a wonderful spectacle. It runs straight, bearing without crowding India’s traffic for fifteen hundred miles—such a river of life as nowhere else exists in the world”.
To this day the G.T. road continues to be a “river of life” for the people of four of the world’s most populous countries – Afghanistan, Pakistan, India, and Bangladesh.
A part of the current route spanning the Grand Trunk Road is said to have been in existence during the Maurya Empire (322-185 BCE), when it was known as Uttarapatha (Road to the North). The road stretched from the mouth of the Ganges at Tamluk in Bengal to Balkh in modern-day Afghanistan. However, it is Sher Shah Suri who is credited as being the original architect of what is now known as the Grand Trunk Road. His main purpose was to facilitate trade during his reign and connect his hometown, Sasaram, in Bihar, to Agra, the capital of his empire. It was during his reign that it was named Sadak-e-Azam (Great Road). Sher Shah had trees planted on both sides of the road and built sarais (inns), and constructed wells for travelers along the Taxila section of the road. The Mughals extended the eastern point of the road to Chittagong (in Bangladesh), and the western point to Kabul. Then, during the British Rule, Lord William Bentinck initiated further improvement of the road, which was renamed as the ‘Grand Trunk Road’. It was the British who connected Howrah and Peshawar to the stretch, bringing the total length of the G.T. Road to 2500 kilometers. The Grand Truck Road was a necessity at that time to facilitate trade and to secure the vast empire through swift troop movement as and when required.
Inspired by the grandeur of the Grand Trunk Road, the ‘modern day rulers’ in Pakistan have kept alive the Indian legacy of building and construction. Many grandiose projects encompassing Motorways, Metros, Orange Line (and more multi-coloured lines), underpasses, and bridges dot the major cities of Pakistan. Billions of rupees have been doled out for these subsidized projects, funded by accumulating high levels of debt. This in a country that lacks basic facilities such as clean drinking water, education, healthcare, electricity, and security. This in a country that is burdened with debt and non-performing and loss-making Public Sector Enterprises. This in a country where the edifice of governance and institution building continues to be badly eroded. This in a country that has suffered immense reputational damage over the ongoing Panamagate issue and the numerous scandal-ridden non-functional power projects.
While roads and bridges are an important part of a country’s infrastructure, but these alone do not make a country. One of the most pressing issues hindering the development and growth of Pakistan is Electricity, or the lack of it. Since the Zia era, the load-shedding issue has gotten progressively worse and the lives of the people and the performance of the businesses has been severely affected by it. While successive governments over the years, be they dictatorships or democratically elected, had the opportunity to resolve the problem, none were able to do so. The Kalabagh Dam, supposedly the savior of the nation, now seems like a pipe-dream. Now all hope is focused on the CPEC-related power projects and the Chinese to alleviate the pressing power issue.
In his article: “How Nepal got the electricity flowing”, Bikash Sangraula, has provided an interesting insight into how Nepal has been able to overcome its issue of severe electricity shortfall. For a country plagued by hours of load-shedding the people in Nepal, much like the people of Pakistan, had to endure the hardship of enforced power cuts throughout the day. This was leading to lower productivity and higher costs as the people invested heavily in inverters and alternative energy solutions to try and manage their daily lives as best as they could. However, in October of 2016, as if by magic, the power was restored in full in Nepal. It seemed as if the power had been there all along and had suddenly been released. Fact: All that was needed was the right engineer, a government desperate to show its people progress, and uncovering and dismantling of a web of corruption that had been stealing power decades.
It’s estimated that Nepal has the potential to generate almost 83,000 megawatts (MW) of electricity from its water resources, while it has been able to generate only 900 MW. In contract, Pakistan is estimated to have 65,000 MW of identified projects and a potential for 100,000 MW of electricity production using and building water resources. As in Nepal the potential remains largely under-utilized, with the reasons ranging from political interference, instability, corruption, and prohibitive costs.
Insiders in the Nepal Electricity Authority (NEA) have indicated that those at the helm of the state-run monopoly deliberately mismanaged a largely manageable power crisis, with the aim of creating a market for the alternative energy lobby, which in return lined the pockets of their benefactors. Forecasts of potential shortfalls were prepared based on exaggerated demand and suppressed supply figures and the blame was shifted on to the previous governments’ ineptitude. Sounds a lot like Pakistan, where we are constantly fed shortage scenarios, and how the government is trying to meet the needs through their efforts. In the process we see thriving alternative energy solution businesses, massive corruption through organized mafias, power projects that never fired up, and unending line losses.
There is a heavy burden on the economy through the adoption of alternative energy solutions by the residential and commercial users. The diesel and petrol generators increase the burden for petroleum imports, resulting in the increased outflow of precious foreign currency at a time inflows are under strain. In addition the use of devices such as UPS inverters places a severe strain on the strain on the already fragile supply side and cause immense environmental damage. The inverters use electricity for charging thus increasing the load factor and there is an estimated 30% of energy losses. Pakistan is plagued by this situation with almost every household having installed some form of back-up charging devices, which actually increases the electricity requirement in the country.
Just as in Nepal, in Pakistan if one can manage it and live with it, businesses and households can have electricity on a 24-hour basis by paying the relevant line man on a regular basis, while the honest are left to power their factories and houses during blackout hours using higher cost diesel or other fuels.
So how did Nepal achieve zero load-shedding and can Pakistan do it?
In the September of 2016, the government of Prime Minister Pushpa Kamal Dahal, known as Prachanda, appointed Kul Man Ghising as the NEA’s Managing Director. Mr. Prachanda, Chairman of the Communist Party of Nepal (Maoist-Center) and a guerrilla leader in the Maoist insurgency, served as prime minister for nine months after his party’s stunning win in 2008. But his government failed to deliver on their insurgency-era utopian promises and lost power in 2009. Re-elected in 2016, he wanted to improve the living standards ahead of general elections scheduled for early 2018. Sounds a bit like Pakistan, where the PML-N government failed to deliver on its fiery pre-election rhetoric and are now bracing for the 2018 elections on ‘revised’ promises of resolving the power crisis by 2018.
Mr. Prachanda gave full authority to Mr. Ghising to resolve the pressing issue of electricity that had been severely constraining the country’s living standards and productivity. Pakistan too faces a similar problem with a sharp decline in productivity levels and constraints on exports and foreign direct investments as the businesses grapple with the high cost of electricity. This has sharply eroded the competitiveness of Pakistan vis-avis the other regional economies.
Within weeks Mr. Ghising, an electrical engineer with strong demand-management skills, was successful in ending the blackouts in the capital and 10 adjoining districts. The improvements have continued and rapid progress has been made across the country. He basically took back the electricity that some industries were enjoying illegally and distributed it equitably to consumers. Crucially his personal integrity, honesty and resistance made the difference. With full political support from Mr. Prachanda, corrupt officials were removed as the situation continues to improve. Inefficiency and corruption was punished as the NEA embarked on a path of increased efficiency and productivity.
Power supply has been increased through optimizing power-plant operations, which are now generating around 25 percent more power, translating into an additional 100 MW of power. The policy of providing uninterrupted power to select industries has been scrapped, which has added another 250 MW of power during peak hours. The end of blackouts has resulted in saving 50 MW of power, as the use of back-up devices has drastically gone down.
The reforms in the sector have provided a level playing field with no industry being favored by NEA at the expense of another. At the same time the costs involved have dropped for the consumers. Productivity has started to improve and operating costs for businesses are on the decline, increasing their competitiveness. The NEA is a loss making entity facing the issue of pilferage, with an estimated 26 percent of system losses of which around 15 percent result from illegal hooking in by households. Efforts are underway to curtail these losses and for turning around NEA.
The situation in Nepal appears to be on the path of recovery. All that was required was a political will, competent management and genuine reforms within the sector.
The situation in Pakistan is eerily similar to Nepal, where we are burdened with inept, corrupt, mismanaged, loss-making public sector enterprises in the power sector. According to the government the line losses have been rising since 2013. The number of units lost was 16,325 million kilo watt hours (M.kwh) in 2013-14. This went up to 16,744 in 2014-15 and was recorded at 16,762 in 2015-16. On top of these losses, heavy amounts are outstanding against provincial governments. Currently an amount of Rs.99.6 Billion is outstanding against provincial governments of which Rs.73 Billion are due from Sindh and Rs.19 Billion from Khyber-Pakhtunkhwa. Similarly, receivables from Azad Jammu and Kashmir are Rs.65 Billion, and Karachi Electric Supply Company Rs.46 Billion. This is on top of the billions of rupees in circular debt.
While CPEC is being termed as a game-changer, just how far it goes in resolving the issues and at what cost remains to be seen. It needs to be understood that you cannot build a new structure on a crumbling edifice. To resolve the electricity issue in Pakistan there is a need for genuine and long-term reforms backed by a political will. The issues of line losses, pilferage, and corruption need to be plugged, prior to building new capacity. Responsibility needs to be assigned for the projects that have consumed billions and not come into production, as in the case of Nandipur. Available resources need to be harnessed instead of placing reliance on costlier alternatives, both financially and environmentally. There has to be a change in the mind set of the people who are managing and running these institutions. Priorities need to be clearly defined and finances diverted to the sectors that need them the most.
While costly transportation and construction projects might have a quick turnaround and may add to the vote bank, but they will not light up our houses, power our businesses, or improve our competitiveness in global markets.