Abstract
The advent of neo-liberalism in the last quarter of 20th century was a landmark development in the modern history of economic activity. One of the major features of the neo-liberalist counter-revolution, as opposed to the Keynesian interventionist revolution, was privatization of public utilities which were globally operating as natural monopolies in the state sector. The biggest of the latter universally existed in the power sector. Notwithstanding the global wave of power sector reforms and persistent deficit of financial resources and public trust in the corresponding sector of Pakistan, reforms of GENCOs and privatization of DISCOs in the country remain an unfulfilled promise and a wishful thinking respectively. This paper looks into the factors justifying the privatization of state monopolies in the power sector world over and attempts to make a similar case for Pakistan, advocating a consistent, gradual and sustainable process of reforms to protect societal welfare, save on public resources and help boost up industrial production. It is argued that vested interests are having formidable strongholds in the power sector of Pakistan, while economic theory and universal empirical evidence no longer favor the monopoly in electricity generation and distribution. The findings of study lead to the conclusion that world of 21st century is being led by enterprising investors with bags full of money and a preparedness to welcome risk wherever the niche exists in the market. It is recommended that tangibly concrete efforts should be made to build up the confidence of domestic and foreign investors in the profitability potential of large scale industry of Pakistan; specifically, power sector reforms ought to be the frontline item of public policy agenda, given the current state of affairs regarding electricity supply to domestic and commercial users.
Highlights
The evolutionary process of universe is a continuum of energy transformations
The findings show that 44 percent of the surveyed countries had privatized their electricity industry, with 40 percent allowing the entry of independent power projects (IPPs)
Successful privatization of IESCO and LESCO will eventually pave the way for private distribution companies in other parts of Pakistan which will offer a niche to new investors; The upshot is that the holistic criteria including economic logic, social justice and common sense recommend to begin privatization of DISCOs representing the federal capital and the capital of the largest province in Pakistan
Summary
The evolutionary process of universe is a continuum of energy transformations. The role of energy is no less significant in the evolution of human society and civilization on the home planet. Electricity, though sold in cents, is the most lucrative segment of 6 trillion dollars global energy market.27 It is not surprising, that big sharks in the electricity generation industry of the Western world found their way to countries like Pakistan where the profit margins of FDI were expected to be much higher owing to the factors like: Poor negotiating skills of the representatives of host country and their allegedly apathetic approach to the public trust; Overreliance of the government on International Financial Institution(IFIs); Rent seeking behavior of public servants including kicks in the back; Preference for politically convenient ad hoc solutions to the problems warranting a long run strategy to effectively, efficiently and sustainably serve the national interest. Count for more than one third of total electricity generation of the country, as listed in Table 1 below
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