ISLAMABAD: The World Bank says that the implementation of government’s national electricity policy and the least-cost power generation plan requires political agreement between the federal government and provincial governments, which are not all governed by the same political party.

The bank in a document released for the forthcoming approval of $400 million loan for development policy financing of government’s programme for affordable and clean energy, says the overall risk rating to achieve the objective to reduce circular debt flow through reducing power generation costs, decarbonising the energy mix, improving efficiency in distribution, and retargeting electricity subsidies, is high.

Governance risks are also high as Pakistan’s system of governance is partially subject to influence by elites, which puts reform implementation at risk when reforms adversely affect the interest of certain groups.

The government has developed a new national electricity policy that governs key principles such as efficiency, transparency, competition, financial viability, and environmentally responsibility. Through the new policy, competitive bidding was being introduced for the first time for all generation technologies, except for strategic projects such as large hydropower on the Indus cascade.

According to the document, reduction of power costs and use of captive power and retargeting of electricity subsidies and tariff increase face strong vested interests and will require federal government’s continued strong commitment to implement and sustain.

It is worth noting that the level of commitment that the government has shown for all prior actions has been very robust. Indicator targets have taken into account this commitment but with prudence considering time required to implement some of the reforms and the upcoming elections in 2023.

Political and governance risks are mitigated in part through extensive consultations with government counterparts at the federal and provincial levels, and with major interest groups, aimed at reaching consensus and aligning priorities.

The government has requested the World Bank for a loan of $400m for the operation designed to support the country’s comprehensive power sector reform programme. The operation’s development objective is to reduce circular debt flow through reducing power generation costs, decarbonising the energy mix, improving efficiency in distribution, and retargeting electricity subsidies.

Published in Dawn, July 6th, 2021