IT is ironic that a sizeable power generation capacity is stated to be sitting idle with the private sector while the economy reels under pressure of energy deficit.

Many businesses, particularly small units, have shut down or are drifting towards closure for the want of energy while bigger units bear the brunt on their profitability and competitiveness because of under-utilisation of the installed power generating capacity.

As the privately-owned power generation capacity is fragmented, there is no official data on the subject. The consolidated idle capacity is estimated at over 2000 megawatts.

According to information gathered from varied sources, many big units are equipped with captive power plants. Such plants, however, are said to be using the installed capacity partially.

The legal framework that governs energy economy does not allow power hungry industrial consumers and owners of captive power plants with surplus capacity to strike a mutually beneficial deal.

“Many big industrial enterprises, that require uninterrupted power supply, are twined with captive power plants. However, in many instances, the capacity of power generation unit exceeds the energy needs of the project sponsor”, an industrialist explained.

The owners of such power plants are willing to sell energy in excess of their need and the industrial consumers weary of prolonged electricity outages are ready to pay the demand price to keep wheels of their plants moving. Such transaction, however, are blocked by the archaic laws.

“The current set of laws demands that the excess electricity available with a private party can only be sold to Wapda. A distribution licence is required to sell electricity privately. From what I know there is ban on granting licence to private sector”, an informed energy analyst told Dawn from Islamabad.

Several attempts to reach officials of the concerned ministry for their version proved futile.

An officer, however, privately confirmed that the government allowed private sale and distribution of electricity for five or six years in mid-1990s but withdrew the permission in early years of 2000.

The reason of withdrawal was obvious. The public sector was losing valuable industrial customers to the private sector that was taking a toll on the business viability of the gigantic public enterprise.

“The public power company tends to earn better from industrial customers as domestic consumers are subsidised”, he said.

He admitted that logic does not stand ground today in an environment of acute shortage of energy. He agreed that the legal framework needs to be revisited to make it compatible with the country’s current energy scenario.

“I consume five per cent of total power generating capacity I own. I have multiple generation units run on gas, diesel and petrol. I switch them to power my vertically integrated textile unit depending on the situation of input availability and price advantage”, a former president of the All Pakistan Textile Mills Association told Dawn.

He was responding to a query regarding factors that dissuaded the business community from investing in the energy sector. He said several proposals made in this regard by individuals and groups had been shot down by the concerned ministry.

“It is true. I approached the government with four other friends who have units in the same industrial cluster in Sindh to allow us to jointly install one power plant that may feed common needs of our units. The request was turned down. We were told that we may produce electricity for self-consumption but its commercial sale is allowed only to Wapda”, another industrial tycoon in Karachi informed.

“We prefer cheap energy but are ready to negotiate with private providers if the choice is between dearer source and its unavailability”, a businessman from Lahore commented.

“I had a glass manufacturing unit in Sheikhupura for which I struck a deal with the ICI Chemicals for energy supply. I remember they put up private network of electricity transmission. This was 15 years back”, Eizaz Sheikh a successful businessman with interests also in the cement sector told Dawn over telephone from Lahore.

“Why and when did they change the policy I am not aware. It would be unfair to allow textile tycoons to run on precious gas their captive power plants for commercial purposes but if they can bridge the energy gap for industrial consumer it would actually be a great service for the industry”, said another businessman from Faisalabad skeptic of textile lobby.

“The power riots make news headlines every other day. Letting the installed capacity sit idle is criminal”, another analyst commented.

Some economists blamed the mindset that dominates administrative machinery. “It is the officialdom that detests market. They are control freaks. They dread market competition that threatens monopolistic position of public utilities”, a disgruntled businessman from Karachi commented.

Most experts advocated change in the moribund attitude of the bureaucracy that hindered all moves to liberalise the economy. “Dividends of liberalisation in banking and telecom sectors are exemplary. The competition has improved the quality of services and brought prices down to the level of affordability of ordinary people. The public sector cannot handle the load of power demand on its own”, an analyst commented.

“You cannot manage Pakistan of 2012 with the mindset of 1960s. The country needs changes in legal framework that allows more space to the private sector if the country is to develop”, he added.

A current World Bank ‘Dong Business’ report 2012 states: “Enabling private sector growth and ensuring that poor people can participate in its benefit requires a regulatory environment where new entrants with drive and good ideas, regardless of their gender or ethnic origin, can get started in business and where firms can invest and grow, generating more jobs.”

Pakistan was ranked 105th in the report that judged 183 countries reviewed. Doing Business report 2012 is the ninth in a series of annual reports benchmarking the regulations that enhance business activity and those that constrain it.

The report presents quantitative indicators on business regulation and the protection of property rights for 183 economies. The data are current as of June 2011. —Afshan Subohi