PSDP: HEFTY ALLOCATIONS PALTRY SPENDING
THE SITUATION PREVAILS BECAUSE MANY DEPARTMENTS SUFFER FROM LACK OF CAPACITY TO UNDERTAKE MEGA SIZE PROJECTS
SHABBIR H. KAZMI
Oct 29 - Nov 4, 2012
The successive governments in Pakistan have been making hefty allocations for public sector development programs (PSDP) but spending only a fraction of the budgeted amounts. This can be attributed to two factors: 1) PSDP being the first to axe when the governments faces crunch and 2) lack of capacity to undertake mega projects. Added to these are inefficiencies, massive corruption and lack of monitoring. However, the real problem is likes and dislikes of donors and multilateral financial institutions play a key role in the execution of projects.
Pakistan continues to suffer from huge budget deficit and hefty allocations for PSDP are made only to achieve political mileage or lure the multilateral donors but actual spending remains paltry. Most of the developmental projects are conceived and designed with the help of donors, based on their priorities and not because the country needs these. Ironically multilateral agencies take away a significant portion of the grants and loans as consultants' fees and also insist on buying plant and machinery from the countries of their choice, irrespective of the fact these are too costly.
The other problem is that local executors spend substantial amounts on maintenance of elegant offices, paying handsome salary to staff, purchase of expensive vehicles but actual spending makes only a small percentage of the total spending. Since no consideration is given to mobilize cash for the payment of interest and principal, additional loans and grants are solicited to pay these liabilities.
Historically, in case of crunch the axe falls on PSDP. The whiz kids strongly believe that spending millions on elected representatives is more important than construction of educational institutions, healthcare facilities, water supply and effluent disposal infrastructure and even child and mother care centers. Millions of children and mothers die every year due to inadequate health facilities. The situation is worst in rural areas because private hospitals are available in urban areas, at least where people can get the cure and care.
Public sector suffers from lack of perception as well as lack of capacity to undertake mega projects. Even if it gets the funds from outside it emerges incapable of undertaking such projects effectively and efficiently. Pakistan has been borrowing huge amounts for the maintenance of water reservoirs and irrigation systems. However, most neglected projects include Sukkur and Kotri barrages. Another example of badly conceived and executed projects is LBDO and RBDO. One of the worst examples is discharge of saline water into Manchar lake.
WAPDA is still responsible for construction of water reservoirs and hydel plants. Its power wing has been split in NTDC, Discos and Gencos. This restructuring was aimed at privatization of Discos and Gencos but the objective has not been achieved in almost twenty years. This is because of lack political commitment as well as the pressure of groups having vested interest. Be it WAPDA or any other state owned enterprise, these have become the 'employment houses' for the political activists. One does not have any objection on employing political affiliates as long as they remain productive workers. However, the political activists given jobs in state owned enterprises become a 'big pain'. Not only that they don't work but also indulge in corruption.
Pakistan inherited one of the largest man-made irrigation systems at the time of independence, which has depleted with the passage of time due to inadequate repair and maintenance. Not only that huge quantity of water is wasted annually, it also leads to water logging and salinity. Every year thousands of acres of land are rendered uncultivable. On top of that ill-conceived projects add to the woes of farmers. Country faces precarious situation because if the rainfall in low drought like situation is created and in case there are torrential rains worst deluges are caused.
Nearly 8,000MW electricity is produced by the IPPs, which enjoy 'cost passed on' advantage. Public sector entities are still responsible for generation, transmission and distribution of electricity. Distribution companies buy electricity at expensive rates, suffer from two contentious issues: 1) rampant theft and 2) mounting receivables. If they dispatch 100 units receive payment for 30 units and remaining goes towards theft and uncollectable. The failure to rectify the situation has resulted in circular debt amount to billions of rupees. The problem is that cosmetics steps are taken but no effort is made to remove the root cause.
Until recently gas distribution companies were managed more prudently. Pilferage of gas is more difficult as compared to electrify but granting indiscriminate connections, particularly for CNG stations has caused serious problems. Not only demand exceeds supply but theft of gas is also on the rise, especially by the CNG stations owned by the politicians. Gas pilferage/leakage SNGPL now exceeds 300mmcfd, which is enough to keep fertilizer plants getting gas from its network
Sui twins are listed at local stock exchanges but majority stake is still held by the GoP. Gas distribution companies also victim of circular debt issue. On one hand they are unable to undertake revamping and expansion of their networks but more importantly face huge leakage from highly depleted transmission and distribution networks. The added problem is that profitability of gas marketing companies is dependent on their operating assets. Since these are not able to create new assets their profit is also going down, bad for the government and also bad for shareholders.
There is a need to specifically mention the precarious water supply position of Karachi, which is at the mercy of tanker mafia. All types of consumers spend billions of rupees annually on buying water, due to little or no water flowing in the pipelines. This grave situation can be attributed to pilferage of water from the main lines by the tanker mafia. Almost all the localities, irrespective of low income or posh suffer from this contentious problem. The KW&SB owes billions of rupees to KESC because it can't recover the payments. The consumers have a valid point that of KW&SB can't supply water; it should not expect payment of highly inflated bills.