BETWEEN the finances and the technicals, reforming the power sector is clearly amongst the top priorities of the new government.

But many of the reforms that are being talked about have been tried unsuccessfully by many others before, including by Mr Sharif’s last government.

The plan they have chalked out looks something like this: raise roughly Rs500 billion, as much as possible from banks and print the rest. Use this money to eliminate the circular debt and get the power plants churning, the electricity crackling through the country’s aging transmission lines.

While the power bureaucracy is busy burning its way through these funds, start implementing some far-reaching reforms that transform the power sector altogether and prepare it for eventual privatisation.

“There’s no doubt about one thing, the inefficiencies have to go,” says Razzak Dawood, Chairman of Descon Engineering and owner of a power plant that has struggled for fuel supply.

“And only the private sector can do that. Just compare the efficiencies of the private power producers with those of the government power plants.”

According to industry insiders, some of the government-owned power plants are operating at efficiency levels of less than 10 per cent, meaning more than 90 per cent of the fuel burned in their furnaces is wasted. Rectifying this is key to resolving the power crisis.

“You’ll see advertisements for positions of chief executive for PEPCO, all the distribution companies, and for NTDC in the first few days of the new government,” says Khwaja Asif, the new water and power minister.

The advertisements will be followed by a series of measures that will take all public sector companies — including, but not limited to those in the power sector — out of the control of the ministries and placed under a holding company.

“We’ve got to locate the right people for the right jobs, make the process transparent,” says Shaukat Tarin, who was financial adviser for a brief period to the last government before resigning on grounds of principle.

“That’s the challenge here,” he adds with his characteristic bravado.The party’s word in this department carries some credibility. In its last stint in power, from 1997 till 1999, the government of Nawaz Sharif did exactly this with three large public sector banks, and Shaukat Tarin was given charge of Habib Bank with the mandate to prepare it for privatisation.

It took something like five years for the job to get done, but by 2003 all the banks that had been handed to private-sector management were indeed privatised. But did this bring about any material improvement in their performance as banks?

The answer is not that clear. These banks have certainly been quick to embrace innovation — whether ATMs yesterday, or online banking today or mobile banking tomorrow — and their branch operations no longer resemble tea halls in a railway station.

But some argue that the improvements brought about have been largely cosmetic. In their core function as banks — as intermediaries between savers and investors — they have failed dismally, preferring to eschew risk-based lending to private sector companies in favour of low-return but secure lending to government. Almost all of these top five banks have allowed their credit risk departments to wither on the vine, scaled back their staffs in corporate banking departments while growing their operations in treasury, which deals largely with lending to the government and anticipating money market moves.

STRONG REGULATOR NEEDED: Tarin himself agrees that there is a failure here, but attributes it to the State Bank of Pakistan, as the regulator, rather than to the idea of privatisation itself. He agrees that along with privatisation, a strong regulator needs to be developed to “look after the interests of the public, to act like an umpire” rather than an imperious decision-maker.

Razzak Dawood also agrees, and points to electricity markets in advanced countries as an example. “You have to avoid concentration in the hands of one or two people. If somebody manages to acquire 15 to 20 per cent of your generation capacity, for instance, is that a good thing?”

According to Tarin, the working group developing the road map for the new government has deliberated on how the regulator will need to be strengthened, to monitor efficiencies for example, and what sort of legislation will need to be drafted for the purpose.

Some dangers to avoid will include concentration, failure to create a mechanism to generate a market price for electricity, and predatory investors who take controlling share in companies only to plunder their cash flows.

The power sector is different from the banking sector in this important respect: it serves as a lifeline in the daily lives of tens of millions of citizens. Failure of private power operators to properly discharge their functions will be far more disruptive to people’s daily lives than similar failures have been in the banking sector.

The private sector brings with it a promise of reform, but also the perils of failure and disarticulation, and this is the tightrope the PML-N has promised it will walk to get the country to the other side of this crisis.