A governance at loss

LAHORE: Pakistan is annually taking a hit of around $12 billion as a result of bad governance-led power transmission losses, gas leakages because of inefficient appliances, energy theft, wastage of water for the lack of conservation infrastructure, crop damages, and loss-making public sector enterprises.

The circular debt in the power sector is above Rs1,200 billion per year that at current dollar rate is equivalent to $5.2 billion. Successive governments have failed to exert their writ on the rampant corruption in the power sector. In fact, no serious or sustained efforts have been made to improve governance in this sector. We know that most of the electricity in our country is generated through imported fuel. We can safely assume that half the power theft drains the foreign exchange by $2 billion.

In the case of gas, the distributors and regulators are fully aware that our domestic appliances have only 30 percent efficiency that means 70 percent of the gas used is wasted. If the domestic home appliances particularly gas-fired room heaters and geysers are standardised by the regulators there would be no need for gas load-shedding during winter.

If the industrial production would not suffer, the exports would increase. This would require no government funds. Then there is over 10 percent theft in gas distribution. It was zero two decades back. By strictly regulating the use of efficient appliances, the gas shortages in the country could be drastically reduced. A safe guess is that we are wasting gas worth over $5 billion yearly. If the government exercises its writ properly, this loss could be avoided.

The state-owned enterprises incur a cumulative loss of Rs1,000 billion per year (excluding gas and power losses). Closing loss-making enterprises or handing them over to the private sector at any price with complete transparency could save the country this amount and reduce the budget deficit.

Pakistan could improve its growth rate without any foreign assistance if the above losses are brought down to reasonable levels. Improvements in many of these cases would not require cash but only prudent, effective, and transparent regulators. Where investment is required, the amount would be many times lower than adding further capacities. Improvement would come if the government succeeded in establishing its writ and improving its governance.

There are other areas where public awareness is required through the government. The water conservation techniques would not require even 1/10th of the amount needed to build a mega dam. That does not mean that new dams are not needed. We can plan new dams to stop wastage of average 32 MAF water that we throw in the sea and start these projects when resources are available. However, the water availability would increase by at least 30 percent if all the irrigation canals are lined. There would be 30 percent less use of water in the farms if the fields are levelled with laser levellers for which few billion rupees would be needed. This could help the country increase its cultivation area by 20-30 percent and increase agricultural productivity.

Post-harvest losses in Pakistan account for 30 percent of wastage in vegetables and fruits and 7-8 percent in food grains like rice and wheat. Most of these losses are due to faulty storage and packaging. The farmers lose billions in post-harvest losses, while low production also puts the country’s food security at risk. These losses could be controlled through prudent regulations.

For instance, agricultural experts have recommended that instead of stuffing 100-125 kg potatoes and onions in jute bags, regulations should be enacted to pack them in 50 kg breathable plastic net bags to reduce losses. This practice is in vogue in big cities. Similarly, farmers should be provided with small tin silos of 1500-2000 kg to store grains, a practice that has been promoted by the UN’s Food and Agriculture Organisation in many developing countries. We could save a foreign exchange component of at least $2 billion besides enhancing our food security.