In his more than a decade-long affiliation with the Pakistan Tehreek-e-Insaf, Hammad Azhar has contested elections twice and won one National Assembly seat from Lahore, a Pakistan Muslim League-Nawaz stronghold. Azhar, currently heading the Ministry of Energy, has previously served as the Minister of State for Revenue, Minister for Economic Affairs, Minister for Industries and Production, and Minister for Finance.
The articulate Azhar, one of the youngest and most prominent members of Prime Minister Imran Khan’s cabinet, is unambiguously forthright about his commitment to fulfil the promises of his party’s 2018 electoral manifesto, and his passionate yet rational belief in the leadership of his prime minister to make Pakistan a peaceful, prosperous, and progressive country.
For Gulf News, I asked Minister Hammad Azhar a few questions:
Mehr Tarar: In the context of the alleged negligence on the gigantic issue of circular debt, what are the short- and long-term plans to avoid a constant increase in electricity tariffs?
Minister Hammad Azhar: It is important to understand that the biggest component of the circular debt is the exorbitant capacity payments. These, in turn, are the result of the capacity additions committed by the previous governments without doing proper demand and supply projections. Add to that the expensive nature of those contracts.
Our government has renegotiated the contracts with the independent power producers. Recoveries have improved in the power sector, but the issue of surplus capacity remains. To remedy that, we have initiated the industrial energy package, and it has been a huge success, raising the energy absorption patterns in the industrial domain. We are now moving towards certain seasonal pricing incentives for domestic and commercial sectors, which will be started in the winter when the surplus capacity is at its peak.
We have also recently passed an elaborate model that shall regulate further capacity additions by the government on a least cost and competitive, transparent basis. That would prohibit any government, present and future, from adding more capacity unless it is really required. And even that capacity would have to be competitively procured.
As the result of our government’s efforts, the flow of the circular debt has now been reduced from PKR 450 billion per annum from when we took over to PKR 130 billion per annum.
What are the major reasons for the disruption of gas supplies? How does your government plan to deal with the issue that is a huge impediment in the economic growth of the country?
Pakistan’s gas reserves are depleting at an alarming rate of nine percent per annum whilst our energy needs and the size of the population are growing. To bridge the gap, we import LNG from abroad, but there are two major issues with that practice. Firstly, we have no LNG storages, and therefore the cargoes must be perfectly timed. That is the reason the current supply chain has no flexibility. Any interruption in supply or demand creates disruptions throughout the energy chain. Secondly, the current gas pricing mechanism in Pakistan does not allow us to fully recover from the customers the cost of the LNG cargoes. Therefore, our ability to use imported gas to meet the unmet demand in our local economy is limited.
We are working on both these issues, and inshaAllah, the energy division will soon float a revised pricing proposal. That should improve the ability of the Sui [gas] companies to enhance supplies by supplementing them with imported gas.
We are also working on building new LNG terminals, but their contracts will be designed very differently from the previous ones. The existing contracts are one-sided in the investor’s favour. The new contracts with the proposed LNG terminals, we are focused on making them balanced and keeping any governmental interference out of their business models.
What is the update on the privatisation of the public sector distribution companies (discos)?
Privatisation of discos is the key to improving service delivery and efficiency in the power sector. Our government has control of 10 distribution companies. Due to their mechanisms differentiating from each other, we are proposing different privatisation models for each one of the discos. Their financial and operational matters are entangled with the governmental machinery in complex ways that need straightening out before bringing in the private sector. Our target is to have tangible progress in the next two years.
We are close to signing a new contact with the Karachi Electric, the only privatised disco. That contract shall unlock further power supplies to Pakistan’s economic hub.
You have led Pakistan’s efforts to have its FATF status changed. What is the latest development in that domain?
Pakistan has made remarkable gains in its FATF compliance. Our action plan focused on the elimination of terror financing is almost complete—26 out of 27 items have been complied with. Our action plan focused on money laundering has only seven items, which we have targeted to complete within six months to one year.
Now Pakistan’s FATF compliance ratio for FATF technical parameters is ahead of even the countries with the most advanced economies. The one given to us was the most challenging action plan given to any country, but I believe that we are delivering and will soon reach the goal post.
How did you in your unexpected [former] position of the Minister for Industries and Production deal with the huge challenges that the country was facing during the pandemic with major shutdowns of many industrial sectors?
My first task as the industries minister was to keep the supply chains of medical products and food sectors intact. Once that was achieved, we realised that we could not maintain the lockdown for too long without inviting an even bigger crisis, and therefore, on the instructions of Prime Minister Khan, the phased reopening of industries was started. We handled the sequencing of that very carefully.
Our next task was to support SMEs upon their reopening. That was quite challenging as we had no data how to locate or assess the support that was required. We then used energy meters to gauge not only their size but also to target cash support towards them. We managed to disburse PKR 50 billion to 3 million SMEs across the country.
The final task was to boost Pakistan’s oxygen production. I am proud to say that my team succeeded in more than doubling the daily oxygen capacity within a year in Pakistan’s private sector.
After our industrial sector had stabilised, we put in place various policies, including the Mobile Manufacturing Policy, the Pakistan Electric Vehicles Policy, and the industrial energy package. All of these have proved, so far, to be quite beneficial as large-scale manufacturing has begun to show a strong growth pattern.