Pakistan: Power Plunder

The mass deaths of more than a thousand in Karachi and other regions by the sweltering heat wave have once again brought to the fore the catastrophic state of infrastructure which exists in Pakistan. The agonising dearth of electricity supplied to society in a country where the power production capacity is more than the consumption needs is a gruesome tragedy caused mainly by power cuts. It is the work of corporate power barons plundering the people's wealth and not producing electricity in order to enhance their rate of profit. Their callous and brutal character nakedly stands exposed. It is treason against more than 200 million people. The political leaders and the strongmen of this belligerent state are accomplices in this vicious act of devouring human lives for the sake of perks and profits.

Pakistan's installed generating capacity is about 23,000 MW. It exceeds the current demand, which stands at 17,000 MW, but the supply that is actually generated is just 10,000 MW. The capacity utilization is only 50%. This is mainly because the producers choose not to buy sufficient fuel for generation yet they still enjoy soaring profits by the compulsory payments made by the state.

More than one third of the installed generating capacity is in the ownership of the imperialist and local bourgeois in the form of independent power producers or IPPs. The current IPP contracts  have existed under different regimes since the 1980’s. They guarantee payments and profits to energy companies with no requirement for fuel efficiency or generation obligations placed on them.

Most private investors have built inefficient oil-powered plants because of the low construction costs involved and short lead times for production. Electricity generation was shifted from Hydro and other sources to furnace oil and other hydrocarbons. This was only due to the relatively low investments needed to get started and the higher rates of profits that can be gained. There are also relatively lower bribery costs towards Pakistan’s political and military/civilian bureaucratic elite in this field making the deal even sweeter for investors.

The result of this cost cutting and corruption is 18-20 hours of load shedding across the country in the scorching summer heat. This is in spite of subsequent regimes shelling out billions of dollars in ‘subsidies’ to these corporate leeches of the power sector. The Pakistani government has assumed $3.6 billion of the power industry's debt even as the government, according to Finance Ministry figures, spent at least $7.4 billion on electricity subsidies to these IPP’s. The government buys electricity from these private producers at a rate of Rs. 12.50 per KW/hr. while the consumers pay an average of Rs. 9.00. This leaves a shortfall of Rs 3.50 per unit that is extracted from the already heavily indebted state exchequer and adds up to hundreds of billions of rupees a year. This is a significant part of the problem. The IPP contracts guarantee massive annual returns (indexed in dollars, not rupees), provide lucrative tax breaks and lead to the Pakistani government paying interest on private funding/credit. This leads to a situation in which it is more expensive for the government to maintain the current set up than to provide the funding for power generation itself.

The global IPP (independent power producer) business was originally conceived in the mid-80s to help international private capital invest in the ex-colonial world. This was seek and secure the maximum profits they could obtain. The imperialist institution of the World Bank facilitated this process and Pakistan became the first client state in 1985. Then followed 40 other countries including China and India. Some discovered the trap at a very early stage and tried to off-load this blatant extortion. General Zia launched the IPPs in Pakistan in 1985. His sinister imposition upon society by US imperialism was above all of economic and strategically devised motives. At the time Reaganomics and the Thatcherite trickle down economic doctrine was being introduced by the bosses of world capitalism.

However, it is a historical irony that the subsequent ‘democratic’ regime of Benazir Bhutto continued by following Zia’s economic legacy. By privatisations and handing out the country’s economy and resources to the corporate vultures of capital she paradoxically rejected her father, Zulfiqar Ali Bhutto’s doctrine of nationalisations and socialist economics. These were the the cornerstone of the party’s founding programme. She had adopted Margaret Thatcher as her economic and political guru. In her second term in office she aggressively embarked upon the policy of transferring electricity generation to the IPP’s.

A recent article in the Financial Times by a Cambridge academic points to the IPP’s friendly policies of that period. “The 1994 privatization of the energy sector offered investors generous returns and created pricey overcapacity. The deal was too good to be true for investors. The government allowed too much capacity to be built and guaranteed the same return on that extra capacity, whether it was used or not. This created an expensive legacy, which is the real problem of today’s energy crisis. The model turned out to be badly constructed in terms of creating value for the government and people of Pakistan. Even in an environment of economic growth and efficient energy generation, it would have been hard for the government to finance the plan. But since both have been absent, it became nearly impossible to pay for privatised energy. Unless that problem is dealt with there is no light at the end of the energy tunnel.”

But Pakistan cannot escape its vicious payment cycle of circular debt nor can it get out of the current deals with the private power barons. It is trapped in this vicious circle and cannot get out of this crisis within the constraints of the capitalist economic structure. All those ‘oppositional’ sections of the political elite subscribe to the same economic doctrine that the incumbent right wing Sharif regime is pursuing. All the main political parties have carried out these neoliberal policies and plundered the state and the people by getting kickbacks through these contracts. All this yelling and vowing to launch movements are mere political stunts. The masses will continue to suffer the torment of load shedding and electricity price hikes whilst the corporate bosses are controlling electricity generation and the government. These politicians and the corporate media will swiftly push this issue away and the agony of these mass killings due to load shedding will be side lined but it will not stop new more pernicious scandals making the headlines.

The mainstream intelligentsia blames the power sector workers and the consumers for this power outage crisis. Nobody dares to point a finger towards those sharks that are fleecing the people by their crushing monopoly in this sector.  All three major foreign investors in Pakistani IPPs have multiplied their original investments and returned billions of dollars of profits to their home countries within a span of 15 years. These are International Power Plc. of the UK, AES Power and Walters Power of the US. They have Pakistani dollar billionaires as their partners pulling the strings of any capitalist regime in Islamabad. In turn, through their massive reserves of capital they can tightly control the political elite in all parties. World Bank guarantees, worth billions of dollars to these original investors, are also still intact. Even the bank is making money in this business.

The writing is there on the wall. Without the expropriation of these IPP’s under workers management and democratic control this issue cannot be resolved. It is true that Pakistan has vast resources of rivers, mountain gorges, deserts and minerals to generate electricity. But these cannot be utilised to generate cheap and clean electricity under capitalism where the only motive of production or building any project is fast and high rates of profit.

The ruling elite is least bothered now than ever of even carrying out the tasks of the industrial or the national democratic revolution. The potential exists to develop shale gas reserves which are estimated to be 51 trillion cubic feet near Karachi alone. You could use the vast expanses of land for solar power or the massive coal reserves; the geologically rewarding sites and water flows for hydro-generation. The sole act of electricity generation’s expropriation will not be enough to unlock this potential under the oligarchy of finance capital.

Capitalism in Pakistan is so rotten and corrupt to the core that the reactionary bourgeois has gone to the extremes of exploitation and coercion of the working classes to accumulate their obscene wealth. Power plunder is just one example of this. The real solution to this crisis is to change the socioeconomic system itself. To destroy this system which is incentivised to produce for profit to create one in its place where the collectivised ownership of the working people allows us to produce for the fulfilment of human need. If we do this society will surge forward and there will be light and relief for the masses who have suffered the misery, destitution, want and deprivation for too long. We need to put an end to the brutal exploitation of this cruel capitalist system once and for all.