The World Bank says that the implementation of the government’s national electricity policy and therefore the least-cost power generation plan requires political agreement between the federal and provincial governments, which aren’t all governed by an equivalent party.
The bank during a document released for the forthcoming approval of $400 million loans for development policy financing of government’s programme for affordable and clean energy, says the general risk rating to realize the target to scale back circular debt flow through reducing power generation costs, decarbonising the energy mix, improving efficiency in distribution, and retargeting electricity subsidies, is high.
Governance risks also are high as Pakistan’s system of governance is partially subject to influence by elites, which puts reform implementation in danger when reforms adversely affect the interest of certain groups.
The government has developed a replacement national electricity policy that governs key principles like efficiency, transparency, competition, financial viability, and environmental responsibility. Through the new policy, competitive bidding was being introduced for the primary time for all generation technologies, apart from strategic projects like 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 can require the federal government’s continued strong commitment to implement and sustain.
It is worth noting that the extent of commitment that the govt has shown for all prior actions has been very robust. Indicator targets have taken under consideration this commitment but with prudence considering the time required to implement a number of the reforms and therefore the upcoming elections in 2023.
Political and governance risks are mitigated partially through extensive consultations with government counterparts at the federal and provincial levels, and with major interest groups, aimed toward reaching consensus and aligning priorities.
The government has requested the planet Bank for a loan of $400m for the operation designed to support the country’s comprehensive power sector reform program. The operation’s development objective is to scale back circular debt flow through reducing power generation costs, decarbonizing the energy mix, improving efficiency in distribution, and retargeting electricity subsidies.