Advertisement

Circular Debt: Pakistan’s Bleeding Wound? Tabish Gauhar Explains

Tabish Gauhar, PM's Special Assistant in an interview with Najma Minhas, Editor Global Village Space Magazine explains the economic pressures created by mounting Circular Debt: Pakistan's Bleeding Wound.

Print Friendly, PDF & Email

Najma Minhas: I would like to start with the big issue in the power sector, which is the circular debt. We hear that the estimated number is around Rs. 2.2 trillion now and that if we do nothing by 2023, it will reach Rs. 4.4 trillion. Can you break down the power sector for us in an easy way so that we can all understand what is going on?

Tabish Gauhar: I think there’s no particularly easy way to explain the circular debt issue that we confront now, but to put it as simplistically as possible. It is due to what I call the tsunami of new contracted capacity that we have inherited.

That is at least in my mind 25 percent more expensive than they could have been, and at least 40 to 50 percent more than our requirement, and to rub salt to the wound they are front-loaded. It means that the average tariff for the first ten years is twice that of the remaining 15 years of the contract.

Furthermore, this contracted capacity that we have inherited, which has hit us, has not been commensurate with the increase in demand. Now why the demand hasn’t grown as much is a result of several factors, one of which is the slowing down economy over the last two years or so, which has picked up recently, but Covid did not help by suppressing demand.

If you think about it from an arithmetic standpoint, there is the numerator, which is the cost. Then you have the denominator, which is the demand; the numerator kept increasing. The demand wasn’t increasing as much, so the average rate of electricity, which is Rupees per kilowatt-hour kept increasing.

If you’re living in a political economy, you just can’t pass that on to the consumer. It is very easy for people to say that the true cost of service should be recovered from the end consumers, but if it is not aligned with the purchasing power of your consumer and that could be domestic, industrial, or commercial, the government is forced to park a portion of that tariff elsewhere.

This is circular debt – which is a burden on the economy that you’ve got to pay for, but that is the cost that you’re not passing onto the consumer and/or not subsidizing.

Read More: 1,200MW of electricity added to national grid to meet high demand

Najma Minhas: So the basic reason for the circular debt you’re saying is because we have too much capacity, and we don’t have enough demand, so we are left with this overhang amount that we have to pay back to the IPPs because we can’t pass on to our consumers?

Tabish Gauhar: Exactly because the contracts are ‘take or pay.’ Hence, regardless of our need or usage, we have to pay for that capacity throughout the year. So unless and until the demand grows in line with the increase in capacity, the circular debt issue won’t go away.

Najma Minhas: My understanding is now in Pakistan, we have around 38,000 megawatts online capacity, but we’ve got an additional 3,000-4,000 coming online, is there anything we can do to not bring the additional online?

Tabish Gauhar: Good question! Our nameplate capacity might be 38,000 megawatts, but our d-rated capacity is about 32,000 megawatts or thereabouts. Now what is worrisome for us is the list of committed projects that are in the pipeline which are either under construction or have attained financial close, or have been issued letters of support.

They are at a stage where they can’t be rolled back, and you might be surprised to hear that that list is almost 87 additional projects worth 23,000 megawatts additionally.

Najma Minhas: On top of the current 32,000, we have another 23,000 megawatts coming online in how many years?

Tabish Gauhar: In the next ten years, so between now and 2029, we’ll have additional 23,000 megawatts. Now we’re going to retire about 7,000 megawatts in the same period. Half of which is our old government-owned plants that are inefficient that have been around since the 1960s, those are being shut down, the remaining half would be shut down by next year.

The older IPPs, for example, HUB power which is the first IPP in Pakistan. HUBCO’s an illustrative case where we pay them almost 30 billion rupees a year in capacity charges on a ‘take or pay’ basis, but we dispatch [use electricity from them] them less than 1 percent of the time during the year, its idle capacity that we are paying for, but their contract won’t expire till 2026 or 2027.

Read More: Hammad Azhar explains the electricity shortfall as PTI MNA criticizes govt

So that’s the issue that we have the idle capacity, but we’re not going to renew when the contract expires. We are now working on a proposal to buy out all the furnace oil IPPson an NPV basis- that are not being dispatched.

So instead of paying them say 400 billion rupees over the next 6 – 7 years, we pay them half of that amount and retire them to take them out of the system, and thus out of the tariffs – so that your bill is reduced at the end of this.

Najma Minhas: These are the furnace oil plants under the 1994 policy?

Tabish Gauhar: These are all the furnace oil plants, about 11 in number and about 3,500 MW in total.

Najma Minhas: How much of the circular debt are you hoping to reduce by this particular policy?

Tabish Gauhar: This particular policy again will reduce it by about 200 billion Rupees or thereabouts, but the plan that we have is very holistic, so if I were to be very ambitious, and say to you that we want to reduce the flow of circular debt to zero by 2023 or 2024.

Najma Minhas: At this moment, if you just reduce by 200 billion, you are still left with Rupees 1.9 trillion.

Tabish Gauhar: So it’s a big mountain to climb, so the do-nothing scenarios are not possible. Suppose we were not to renegotiate any of these IPPs, the demand did not grow any further, or we were not in a position to subsidize any further, the circular debt would indeed double over the next 2-3 years, and that’s the headline that you often read in the newspaper.

But, obviously, we can’t afford a status quo scenario, so there are three things that we can do; one is that we already embarked on renegotiating the contracts; now there’s a flip side of the coin, which is that these are sovereign guarantee backed contracts, so you’re definitely affecting investor sentiment as these are contracts that are supposed to be signed and sealed.

Read More: Prime Minister worried about high rates of electricity

But we have told the investors that we don’t like to do this, but we’re doing it because the sector is unsustainable, and of course, tongue in cheek, you have made a lot of money now it’s about time you give something back.

This includes some of the recently signed contracts, which have geostrategic significance for Pakistan as well, so obviously, renegotiating the signed and sealed contracts is part and parcel of the equation.

Najma Minhas: Have they agreed? We have a very good relationship with China. Is this something that they’re considering about maybe renegotiating or re-profiling some of their debt, so extending it out rather than front-loading it as you mentioned?

Tabish Gauhar: So all of the IPPs that came before the 2015 policy have been renegotiated. The impact of that would be almost 770 billion rupees over the next 20 years, so that’s reasonably significant.

Najma Minhas: When you’ve renegotiated them, you have changed the terms of the contract?

Tabish Gauhar: We reduced their rate of return on their equity; we have asked them to share their upside on operational maintenance cost on their plant, heat efficiency rate, reduce the operation maintenance cost as well, and so on.

Every IPP is kind of distinct, but the net result is about 770 billion saved, and we have also waived off close to 140 billion rupees of liability that was on us on account of other invoices that they had raised against us and arbitration awards that had gone against us, so we renegotiated those, did out-of-court settlements and save what I believe is about 140 billion to the national exchequer, so that’s the pre-2015 IPPs.

With regard to the 2015 IPPs that includes the CPEC, and not all of them are CPEC because there are the recent entrants, we obviously have to tread carefully. I must add here that the Chinese came and invested in our power sector when nobody else did, so I think as a nation we are hugely indebted to them and the fact that we gave them a tariff that they accepted alongside others, is a tariff that we gave them, we offered, and they took that offer.

Read More: CCoE approves increase of electricity tariff by Rs5.36 per unit

Najma Minhas: So that’s an internal question regarding the levels of those tariffs?

Tabish Gauhar: It’s an internal question for us, a bit of soul searching as to why a 1300 megawatt coal-fired plant cost, in our assumptions, 2 billion dollars, when it could have been done at 1.5 billion dollars that’s the soul searching for us.

Najma Minhas: You mentioned this in an article you recently wrote in The News where you wrote that the recent contracts that we signed in 2015 were exponentially more expensive than they needed to be.

blank

Tabish Gauhar: I believe so as a professional, and again you can say that because our risk premium as a country is so high, that’s why those contracts were on the high side from a pricing standpoint.

However, I would still argue that from a sustainability standpoint if I’m an investor, and, I have been investing my entire life minus the last eight months here as a public servant, you do look at the affordability of the economy, and I think that’s where the investors, I believe, could have been a bit more discrete about it.

Najma Minhas: Why did they agree to renegotiate with you then?

Tabish Gauhar: So what they are saying to us is that look, we understand the issue, we want to help; although it may not be the same cookie-cutter approach that you had with the other IPPs, we will help you in some other way reduce the burden.

Prime Minister Imran Khan is absolutely adamant, it is a direct instruction to us, that he does not want to increase the tariff beyond the current rate to the consumer, so that’s where we start off from.

So whatever we do outside the box has to result in a tariff reduction. Now, if you don’t want to reopen the contracts, which they don’t want us to do. Quite frankly and I say publicly, that the Chinese are very concerned that anything we do, if it falls or aligns with the narrative that the West has built against their investment under the Belt and Road Initiative and developing markets allegedly trapping us in debt, and so on, which is not the case, and we don’t believe in that, but they’re sensitive to that.

Read More: Is Pakistan producing surplus electricity?

And I think we have to be mindful of that fact, so whatever relief that they can provide to us maybe it’s in a form that we are able to provide more subsidy to our consumers, at the end of the day, we are still providing subsidy to our electricity consumers and gas consumers, so maybe there is an amount of capital that they can make available to us over the next three years or five years.

Najma Minhas: So are they saying that they might help you financially? Assuming if that happens, where do you intend to use the money? Is that going to go to pay off the circular debt?

Tabish Gauhar: That is the intention; that is the desire. If I reduce the stock of the circular debt, that doesn’t help you as a consumer because that’s parked anyway, you’ve already paid for, now you are paying a portion of that in terms of interest costs thereon, but it’s not a huge amount.

We are trying to reduce the flow, the increase in circular debt, which if we are unable to arrest, will go straight to your electricity bill. So whatever shape or form they adopt to provide relief to the power sector has to be measured in dollars and cents.

We can plow that back into the electricity bill by giving more subsidies to our consumers. Hence, the ministry of finance has a finite pool of capital at the end of the day. We’ve asked for a subsidy of 500 billion rupees next year in the budget we hope to get it.

We will see what the budget says on 11 June. Still, if we can get up another pot of capital from outside the federal budget, we can use that to reduce the tariff for our consumer so that he or she doesn’t have to pay more.

Najma Minhas: You are going to use the money that they give us to help consumers today, but our children might end up having to pay higher rates later on?

Tabish Gauhar: Well, that’s a good question, and again if I had my wish, it would be in the form of a grant. Still, I don’t think life is so good it will be in the form of a long-term soft loan, so in a way pushing the can down the road, your point is valid.

Read More: NEPRA approves an increase in electricity prices

Still, at the end of the day, there is a concept of the time value of money. As the prime minister said, if we have another two years, five years to stabilize the economy, to grow it further, we’ll hopefully earn enough to pay back that loan even if it means paying a bill.

Najma Minhas: All these contracts that have been signed under something called ‘take or pay contract, which means that even if we don’t take the electricity from the IPP, we still have to pay them, can we not change those contracts into ‘take and pay,’ which is that only if I take your electricity, I pay, for those IPPs – for example who have not achieved financial close. Ask them to go out in the market and sell their electricity to whomever they want. That is what was done in the UK in the 1990s. You said there should be lots of sellers, and there should be lots of buyers, and sellers can sell to whomever they want. They take the risk. I, as a government, no longer take that risk. For the people of Pakistan, isn’t that better, that government move out of the market and give the risk to the IPPs?

Tabish Gauhar: That’s part of our deal with the 35 odd IPPs that have signed the master agreement with us, where we have said that once the electricity commodity market, which you call CTBCM, is operationalized by the end of this year or Q122, they should be in a position to find their own buyers and relieve us of the burden of ‘take or pay’ contracts.

So we are already initiating that idea, but if you have a sovereign guarantee and if you believe that you will not be able to find buyers at the price that you can currently sell, you won’t leave the contract and we can’t force them out.

Najma Minhas: Those that want to get out of the contract are you enabling them?

Tabish Gauhar: Absolutely yes, so the electricity commodity market, which should be operationalized, is a work in progress. As you and I are talking, there’s a meeting going on exactly on that subject. It’s the weekly meeting.

It will be a multi-seller, multi-buyer model on a business-to-business basis, and in the first instance, we are liberalizing the wholesale market. We define that as a bulk power consumer who is one megawatt and above, so you won’t qualify for that as a domestic consumer, but we will move to retail liberalization in the next three to five years.

The other thing that is happening in our sector, which I think the government doesn’t get enough credit for, and I say that as a pure technocrat, that this government has done more heavy lifting on the reform side than any other government that has preceded it.

Read More: National grid station to provide electricity for CPIC projects

For example, the exclusivity of the distribution companies will be expiring in 2022 and 2023, which means that as a consumer, just like in the UK, you’ll have a choice of supplier, so if you’re not happy with IESCO, you can pick up the phone and get somebody else to be a supplier, IESCO will still own the wire.

But, the electron could be somebody else’s, it doesn’t have to be IESCO. They can offer you a better rate, better customer service, and so on, so we are moving in that direction. So next year, it will be wholesale, in three to five years it will be at the retail level. The distribution companies will lose their exclusive monopolies as well, so we’re moving in that direction.

Najma Minhas: I am glad you came to the distribution companies; this is the second big element that people talk about when they refer to the circular debt. My understanding is that the losses from transmission and distribution and the lack of recovery amounts to around 400 billion rupees, which are around 17 percent of the whole circular debt what are you doing in that field?

Tabish Gauhar: So the number differs by DISCO, of course.

Najma Minhas: Yes, I read HESCO is 28 percent line losses, PESCO is 35 percent, IESCO in Islamabad is only 8 percent, and the average for the industry is around 17 percent.

Tabish Gauhar: The distribution companies where previous governments haven’t invested enough are the ones that are bleeding cash. There is the technical loss, and there is the non-technical loss, so if you have an outdated, dilapidated transmission and distribution infrastructure, many electrons get lost from a technical standpoint.

So we haven’t invested. Then, of course, there is the commercial loss which is primarily referred to as theft, or more importantly, non-payment of bills; now, of course, there are socio-economic reasons, there are the ground realities that exist in places like Quetta or Hyderabad, Sukkur, Peshawar, or in the tribal areas that we are all familiar with.

There’s a technical solution to that that requires money; for instance, if we have a lot of money, we can have automatic meter infrastructure, prepaid meters where we can disconnect sitting here, for instance, to solve part of the problem.

Read More: Circular debt paralyzes Pakistan’s power sector

But I would say almost 50 percent of the problem would be that, but the issue here is, and again I will be a bit technical here, there is an allowance that is built into the tariff which is passed on to the regular paying, honest consumer, which is about 13.5 percent.

So the regulator allows us a 13.5 percent line loss allowance, over and above that, is the loss that goes to our bottom line in the electric sector. That number is not a very big number that’s about 4 percent or thereabouts, and that’s about 30-40 billion Rupees.

The big loss is on collection where the regulator assumes that you’re going to recover 100 cents to a dollar, assumes that every bill is recovered! In a place like Pakistan, that’s just not going to happen ever!

Even in the UK, there’s a probably some percent loss of revenue and in a developing market like ours where we are at 90 percent, so the total losses which you call Aggregate Technical & Commercial (AT&C) losses have been between Rs. 175 billion – Rs. 200 billion annually (over and above NEPRA’s allowance) that’s the correct figure, but the important point I think we need to recognize is and then it’s not something to be happy about, but it’s a point to be recognized that over the last 2.5 or 3 years this government we’ve had to increase electricity prices by about 40 percent for the reason that I outlined at the outset because of the tsunami of new capacity charges, the devaluation of the rupee versus the dollar, despite that I think we have as a whole maintained our transmission and distribution loss at about 17.5 percent, which marginally improved and the collection ratio at about 90 percent so despite the increase in tariff which would have meant an increase in losses we have kept it constant.

Now the next solution and the real solution, you might ask yourself, is why is it still in the public domain? Why are we not privatizing? Again, there are examples worldwide, where you hand over the management control to a private sector and things do improve.

The cabinet has approved the appointment of a transaction advisor to hand over the management control of all these Discos that are in the public sector now to the private sector over the next two to three years.

Read More: Power sector making up for losses by tariff hike and secret overbilling of consumers

The decision has been taken, and it will be met with stiff resistance; we know that. We are not selling the assets. We are not selling the shares of these companies. We have promised not to lay off workers; we are bringing in private management.

Najma Minhas: You have been CEO of Karachi Electric as well, how is this different from the KE model?

Tabish Gauhar: Very different, because KE is an integrated utility company it does generation, transmission, and distribution, think of a mini WAPDA. It was privatized as a whole, which I recently said, in hindsight, was a policy mistake; it should have been unbundled and handed over to more than one private party.

But in that transaction in 2005 – 66 percent of the shares were offloaded and given to a private sector consortium, but here we’re not selling any shares. All we are saying is we’re going to give you the management control of the business. We are going to retain 100 percent ownership of the assets and shares.

In the Punjab Discos, we expect them to also invest from their balance sheet and earn a return on that, which NEPRA will regulate. In the more loss-making distribution companies, where we know they will probably not invest, we will find the money.

You would be surprised there’s a lot of capital available from the likes of Asian Development Bank, the World Bank even the Chinese, so the issue for us is if we just put in money, not our own money, but borrowed money, in the same setup it will get lost, and you don’t get the payback.

Najma Minhas: When do you see this happening? Recently, in HESCO, there was a strike there that stopped new CEO from taking charge, workers were on strike because they thought HESCO was to be privatized. You’ve been at KE during a period where I remember I was in Karachi, there were shootings all the time in KE, people were on the streets protesting against what was happening in KE, although now it’s supposed to be a relatively efficient company compared to others, but how possible is it going to be possible for you to undertake these reforms in the Discos?

Tabish Gauhar: That’s a challenge, and time will tell whether we stayed the course on that. The Prime Minister is absolutely clear that we need to fix the distribution sector. We already appointed new boards; if you look at the profile of the new board directors on the board, they are all from the private sector, the chairmen are all from the industry.

blank

I would put my hand on my heart and tell you that it was a completely transparent process, the same boards have now identified new Chief Executives. The first test case was HESCO. Yes, there was a protest by employees; it was taken care of today, the gentleman has assumed charge, and we expect the same process to continue.

So, of course, we are going to face a lot of resistance to change, every time you disturb the status quo, resistance is inevitable, and if you can manage the political downside of that, which the prime minister is absolutely clear that he will because he is trying to introduce structural reform sector.

So when he talks about building ten dams over the next ten years, I mean our term will expire in 2023. The people of Pakistan will elect whoever, they want to, but we are working as hard on the Diamer Basha dam, which will be operationalized in 2029.

Najma Minhas: I know we are talking about distribution, but when the prime minister said this, the first thing that came to my mind is we are already crying about the fact that we have too much installed capacity; why are we building ten more dams then?

Tabish Gauhar: I think that’s an issue of water security as well; that’s primarily the reason. Electricity is the byproduct, and of course, we want to replace the older, more expensive dirtier sources of electricity with cleaner and cheaper, and again as you know, we have a target of 60 percent renewable energy by 2030, which we’re going to achieve.

It will be almost 45 percent hydro and 15 percent would be wind, solar and bagasse. You also have nuclear, which doesn’t classify as clean energy, but it doesn’t pollute the environment. We have K2 that was just recently inaugurated and we have K3 coming.

Still, the issue is the same, K2 will cost us 100 billion rupees a year in capacity charge, K3 another 100 billion, the HVDC – the Lahore-Matiari line, that’s 50 billion rupees of ‘take or pay’ charge. The whole of NTDC network is also 50 billion rupees.

So think about it, and put it in perspective, the entire transmission network of Pakistan costs you as a consumer 50 billion rupees a year, and one line HVDC Lahore-Matiari is also costing us 50 billion rupees. That’s why when you say it was front-loaded, it was more expensive, than they could have been.

Najma Minhas: I want to ask you about demand; you said that increasing demand is a crucial component of helping to get rid of the circular debt. What are you working on that front because one of the things that a lot of industry people mention is that why doesn’t the government sell us cheaper electricity -you already have to make capacity payments -why not sell the electricity cheaper to industry rather than for us to pay automatic capacity payments?

Tabish Gauhar: We did that in November last year, and we offered discount between 25 to 50 percent, 25 percent to the big boys, and 50 percent to the SME. I’m talking about the industrial customers here.

The results have been very impressive; we’ve seen a 15 percent month-on-month increase so far, so that experiment has worked, where if you offer them concessions on incremental usage, the industry responds to that price signal, and the demand has gone up.

Najma Minhas: Are you going to continue that model because our electricity is more expensive for industry in Pakistan than it is in India? I read in a PIDE study that in Pakistan it is 16 cents for every kilowatt-hour versus Bangladesh and India, which have 11 cents, and Sri Lanka, which only has 7 cents for the industry. This also fits in with Shaukat Tareen coming in as finance minister, saying he wants to grow the economy. If we’re going to grow, we need to help our industry, so have we thought about maybe providing cheap electricity to SEZs (Specialized economic zones), industry in general? Are these the kinds of policies that you’re thinking about?

Tabish Gauhar: The policy involved right now, that is across the board, of course, is on incremental usage for exporters – what I refer to as zero-rated that’s about 4,000. We are providing them the electricity at 9 cents fixed rate to help with our exports, which used to be 7.5 cents, but we are now providing them at 9 cents, and that policy will continue in the next year as well and beyond.

Even the incremental usage subsidy, what you call the industrial support package, will continue till October 2023, so they have lower pricing on the industrial side. For the special economic zone, we will offer them the electricity at a price, which will make them competitive.

The industry issue has been in Pakistan, and that’s a historical fact, that they used to cross-subsidize the domestic consumers. Hence, electricity has been more expensive in Pakistan for the industry than in Vietnam or Bangladesh, or India because those guys were subsidizing the poor folk on the street.

Najma Minhas: Poor people exist in Bangladesh, so why is the industry electricity price still so much lower? Unless their government is not helping the poor?

Tabish Gauhar: The gas cost there is quite low, and in Pakistan in the recent past last five years, we have been importing RLNG, which is probably two times the expense of the gas that they’re getting in Bangladesh, so if you’re going to charge the true cost of service or product, it is going to make our industries more uncompetitive, so we are subsidizing on the gas side by providing them with that commodity at $6.5 although we are importing at about $10 on average, so that’s the subsidy that’s about 40 billion rupees a year.

Najma Minhas: A lot of these industry players also have what we call captive power generation. At one point in 2012-15, when we had significant load shedding; everybody was encouraged by the government, all these textile companies, and various other companies to set up their plants, so they all went ahead set up their plants. The government gave them cheap gas, and you’re telling me that you are helping industry because you give them cheap gas, but at the same time, now you are saying we are going to stop providing that gas, and therefore they need to move to the grid so how are you intending to help them now?

Tabish Gauhar: That’s the policy that was approved by the cabinet in February this year, and I do appreciate the fact that it has been a bone of contention between captive power users and us.

As you rightly pointed out, the state of Pakistan encouraged them to go captive when there was less supply viz-a-viz demand, seven years ago. But, now we have excess capacity, and we are saying to them that you’ve got to be part of the solution if you want a better price, we are willing to come to the table and talk about that.

So we will not make you uncompetitive, but please come back onto the grid because we need you. We need to increase the denominator; the more industrial consumers we have in our mix, the lower the tariff will be for the economy as a whole.

Tabish Gauhar

My argument with our industrial friends has always been that you know you cannot operate on an island that is surrounded by a sea of chaos if the whole power sector and the economy are under severe stress because of the circular debt.

Because of the rising price of electricity, you can’t be isolated, so we are guaranteeing you supply, the quality of supply- the frequency and voltage fluctuation we can fix that, there’s a technical solution in terms of pricing, we can fix that as well.

They have invested in those capital units, so it’s a sunk cost for them, I appreciate that, but at the end of the day, if you look at it holistically as a policymaker, we have to look at the big picture.

We say you might be a loser from your individual P&L standpoint. But, I’m looking at the P&L of the whole sector and the entire economy, and if it’s a common good, then you’ve got to play your role as well.

Najma Minhas: You mentioned that the last government was responsible for the circular debt mess because they left PTI a very bad economy. The Rupee devalued, and that’s one of the major reasons for the circular debt. But the fact of the matter is that significant devaluation happened under the PTI government, so do you not hold your government responsible for that?

Tabish Gauhar: Our narrative on that is that the Rupee was artificially overvalued kept at that level.

Najma Minhas: Narrative aside, the reality is that the circular debt has jumped so much is because of the devaluation of around 45 percent plus?

Tabish Gauhar: It has contributed because a significant proportion of our energy cost is dollar-denominated. I mean, the Rupee was probably 110 in 2018. It is 155 now because that is a true reflection of the value of our currency viz-a-viz demand, given our economic dynamics and our fundamentals.

So we let the Rupee trade at a level that is where it is stable itself. Previously we believe that it was artificially kept inflated, so you are in a way kicking the can down the road and deferring the inevitable that was bound to happen.

So I mean, it’s a question of macroeconomics, and I am no macroeconomist. Still, when the Rupee devalues, the price of RNLG goes up, and other fuels go up. A lot of our capacity payments are dollar-denominated, including return on equity and the foreign loans that were used to finance those projects, which means that the tariff every quarter adjusted to account for rupee devaluation.

Now the Rupee has been stable for the last few months, we’re pleased about that, and we hope it stays at that level, and the economy keeps growing, and you won’t have that impact going forward. But that initial devaluation, we believe, resulted from the imprudent economic policies adopted by the previous government.

Najma Minhas: What legacy do you intend to leave behind in this division?

Tabish Gauhar: Well, the prime minister is absolutely clear that he wants to reform and restructure the energy sector on a sustainable basis, so even if we have to take politically difficult decisions which would annoy a lot of vested interests if we can put our sector on a basis, where the price of the commodity, whether it’s petrol diesel or electricity affordable for our economy in terms of our purchasing power and if you take a few steps in that direction I’d be a very happy man.

Interview, with Tahish Gauhar, Prime Minister’s Special Assistant (SAPM), conduced by Managing Editor GVS appeared in the June issue of Global Village Space Magazine. 

Latest

Social media: A safe haven for fifth generation warfare?

Ayaz Muhammad Khan gives us an insight into how social media is misused. Instead of encouraging enlightened discussions, social media has become an important tool for fifth-generation warfare. Through social media, propaganda and cyber crimes spread.