Please note this is an upcoming publication in the well-known yearly follow-up publication of Islamabad Policy Research Institute , ““Solutions for Energy Crisis in Pakistan 2015″.All rights reserved!

“The Judicial Response in 2014”

 By Barrister Aemen Zulfikar Maluka

Introduction

In my last year’s submission to this amazing group of scholars and practitioners in the field of energy, my focus was on the shortcomings of our promising yet practically dysfunctional Enercon. There is a new bill for 2014 published on their Website[1], which claims that the National Energy Conservation Centre is now on it’s way to becoming an independent authority. As it is too early to comment upon the impact of this new bill on progress of this organization based on its road to becoming more efficient through organizational independence, I have decided to focus this year’s submission to identifying the more practical reasons for the energy crisis, which are currently facing Pakistan. The aim is to examine the judicial response in this regard.

The joined cases of Engineer Iqbal Zafar Jhagra And Senator Rukhsana Zuberi Vs Federation Of Pakistan and others 2014 P T D 24 , and OGRA through Secretary vs MIDWAY II, CNG STATION 2014 SCMR 220,

In my view, from a judicial point of view, 2014 has been promising as there have been major shifts in the way the courts are choosing to take up and discuss the basic elements leading to the energy crisis. For this purpose, for this year’s submission I have chosen to focus on a few judgments, which have recognized that Energy and access to it, is an actual human right. In the recent case of Engineer Iqbal Zafar Jhagra And Senator Rukhsana Zuberi Vs Federation Of Pakistan and others 2014 P T D 24, Article 38 of Constitution of Pakistan was invoked, based on the need for promotion of social and economic well-being of the people, the court acknowledged that the availability of energy and the progress of a nation/State were inextricably linked. Article 38 of the Constitution states that, “The State shall… secure the well-being of the people… by raising their standard of living…”Based on this, the Supreme Court observed that without energy, there could be no progress, no development which could raise the standard of living of the people as commanded by Art.38 of the Constitution. This is one way of looking at the matter of the energy crisis we are currently facing. Additionally, Article 9 (Right to Life) Constitution of Pakistan was also invoked in order to assert that the provision of electricity came under the guarantee of the right to life, which is enshrined under Article 9 of the constitution. Corruption in rental power plants has been dealt with previously in 2012 SCMR 773 and Shehla Zia v. Federation of Pakistan PLD 1994 SC 694 ref, where this right was also invoked. This was heard collectively with OGRA through Secretary vs MIDWAY II, CNG STATION 2014 SCMR 220, which was also taken up as a human rights case.In a review under S. 7, Constitution of Pakistan, Arts. 38 & 184(3) – a human rights case – the Supreme Court took action based on newspaper clippings regarding unprecedented load shedding in the country and an increase in electricity prices, and the fixing of the price of petroleum products. It was noted that the increase in domestic price of petrol despite a steady decrease in petrol prices in the international market. The court said that no policy justification existed for such an increase – prices of petrol, diesel, petroleum products, etc. were being fixed arbitrarily by the Oil and Gas Regulatory Authority without taking into consideration the rate in the international market – and that petrol prices should be set in consonance with the international market. The court said that under Article 38 of the Constitution directed the State to act for the welfare of the people – fixing high petrol/diesel rates without justification was clearly not in the welfare of the people – the Supreme Court directed that in future all necessary steps should be taken in such behalf to fix prices strictly in accordance with the prevailing rates in the international market. By 30 November 2014, after much political pressure and similar legal lobbying, the current Government has decreased the oil and petroleum prices significantly. However a backlash occurred when a country wide shortage was created by unscrupulous petrol mongers in January 2015, literally paralyzing the entire transport system of the country.

What is extremely encouraging to see in this case is the way the courts are willing to take up the energy crisis as a fundamental breach of human rights. Basically in this case the court was taking up a number of matters including a suo moto notice regarding news paper clippings regarding unprecedented load-shedding in the country and increase in electricity prices, the gap between demand and supply of electricity, electricity theft, on-availability of Residual Fuel Oil (RFO) and gas, power plants performing below-capacity, national non-preference of hydro-power and over all state mismanagement of the energy crisis.

One of the core challenges to Energy Conservation today is was electricity theft. Large sections of population, especially rural farms with hundreds of tube wells, government departments, residents of Federally Administered Tribal Areas (FATA), Karachi, Sindh, Seraiki belt, Khyber Pakhtunkhwa (KPK) and Balochistan, and many industrial and production units, etc., were either not paying electricity bills at all or not according to cost of electricity they consumed. In 2013 alone, a loss of Rs.750 billion was caused to the exchequer. The common consumer often has to pay exorbitant bills to cover-up the losses that were caused by electricity theft. The courts have now duly acknowledged that this type of theft is like stealing a valuable natural resource from the people with impunity and that the State should take strict action.

Another issue, which has been pinpointed and acknowledged by the latest decisions of the Apex court, is the alarming differential between the production capacity of power plants and the amount of electricity that they were actually generating despite the fact that the existing resources/capacity at the system’s disposal were sufficient to overcome electricity shortfall faced by the country. Another reason for load shedding crisis as reviewed, has been the non-availability of Residual Fuel Oil (RFO) and gas. Plants operating on such fuel and gas were not producing electricity in consonance with their full potential. The RFO problem is tied in closely with Independent Power Producers (IPPs) failing to honor the terms of agreements that they were bound by. Seemingly the IPPs have been taking undue and deleterious advantage of the weak financial position of Pakistan Electric Power Company Limited (PEPCO). It seems that the IPPs have slowed down their production and assigned various reasons for non-payment of electricity. One reason that could be countenanced as valid in such regard was the non-availability of Residual Fuel Oil (RFO) and gas but still there is no reason to pin the blame solely on PEPCO. In terms of the low efficiency of WAPDA, the main reason has perhaps been the decentralization WAPDA into different generation companies (GENCOs) creating problems in in administrative efficiency, its increased reliance on Residual Fuel Oil (RFO) and gas powered IPPs, as well as the seasonal constraints on hydroelectric power. Perhaps the main energy policy failure occurred where instead of increasing and enhancing the facilities available to harness hydro-electric power such as dams, barrages etc., the Government seemed to be engaged in a policy of promoting Residual Fuel Oil (RFO) as a basis for producing electricity.

The right to life (Article 9) prompted the court to direct authorities to stop discriminating between rural and urban regions and to ensure that load shedding was managed by controlling all kinds of losses after supply of generation like line losses, theft, etc., for example, by using modern devices like introducing smart meters and supplying electricity only to consumers, who were ready and willing to make payment; that efforts should be made to persuade all kinds of unauthorized consumers to make payments of bills, failing which action under relevant laws/rules should be taken against them. It was further suggested that National Transmission and Despatch Company Limited (NTDC) and distribution companies (DISCOS) must update their policies accordingly. While looking at Captive Power Plants another risk to energy stability was identified as these were getting gas at subsidized rates and then selling electricity at marked-up prices to the National Transmission and Despatch Company (NTDC) making power expensive than normal rates and that this mode of supply was being used for provision of an uninterrupted supply of electricity to affluent cooperative societies. While it would be impractical and unfair to withdraw these subsidies, it is still worth looking at the fact that the purpose of such subsidies is being wasted whenever a set, affluent minority of people is benefitting from it. Due to this, as affected classes were not benefitting from the arrangement, such concessions and subsidies in case of Captive Power Plants were also in violation of the national gas allocation policy

Another issue, which has been duly discussed by the judiciary in 2014, has been the fact that Petrol Prices in Pakistan have been unstable at a point when those in the international market are steadily decreasing. While the courts tried to do their bit to get the petrol prices to come down, the reduction was only a short blessing and as at January 2015, Pakistani people are going through an artificial fuel shortage, paralyzing their daily lifestyles. It is not that we do not have the resources and capability to overcome load-shedding but that we lack the requisite policy infrastructure use the existing resources, while giving priority to capacity building of hydro-electric power, in order to challenge this crisis. This crisis is a result of the good will direction of the government regarding the reduction of prices of petrol, diesel, petroleum products, etc. which were invariably and arbitrarily being fixed by OGRA without taking into consideration the prices in the international market.

Other case updates in the spirit of Energy Solutions for Pakistan

(a) 2014 PLD 206 SUPREME-COURT (MUHAMMAD ASIF vs THE FEDERATION OF PAKISTAN)

This was a constitutional petition under Art. 184(3) of the Constitution relating to award of a project by Sui Southern Gas Company Limited (SSGCL), to State enterprise Jamshoro Joint Venture Limited (JJVL) for extraction of Liquefied Petroleum Gas (LPG). The court took notice of gross criminal negligence, lack of transparency, corruption and corrupts practices committed in the bidding process and award of project. Undue and illegal favours extended to JJVL by SSGCL were found to have caused losses worth billions of rupees. Bearing this in mind, the Supreme Court of Pakistan set aside the project in question and constituted a two-person Committee to determine certain issues in relation to the project and give its suggestions thereupon. It is expected that we will be hearing more in this regard during 2015 -2016. The court in this decision also had something significant to say about Arts. 172(2) & (3) of the Pakistani Constitution, that is, that the ownership of natural resources, (mineral oil and natural gas) was ultimately vested in the People of Pakistan through their Governments and State enterprises.

(b) 2014 SCMR 287 SUPREME-COURT

The Supreme Court of Pakistan took action under Rule 35 & 199(3) – Oil and Gas Regulatory Authority Ordinance (XVII of 2002), Ss.23 (2)(b) & (d) – and Mineral Industrial Gases Safety Rules, 2010, Rr. 80 & 143, the Petroleum Rules, 1985, R. 21, The Penal Code (XLV of 1860), Ss. 300 & 301and the Constitution of Pakistan, Art.184 (3) (as a human rights case) on a news clipping regarding an incident of the burning of a school van in which sixteen (16) children and one school teacher lost their lives, the cause of incident being the spillage of petrol from the petrol cans kept on the floor of the vehicle which ignited a fire due to contact with the hot engine surface, short circuiting of wiring and the fact that the driver was smoking. The court ordered compensation to be paid to the aggrieved families and directed that owners of all commercial vehicles should remove CNG cylinders from their vehicles, which had not been fitted by the approved companies/authorised dealers, and that the Provincial Inspector General Police should take appropriate action against persons who were responsible for letting the present incident happen. It is felt that more could have been done in this case, however, regarding the health and safety measures through which Petroleum and Gas for transport is handled and approved for use.

c) 2014 PLD 350 SUPREME-COURT (APPLICATION BY ABDUL HAKEEM KHOSO, ADVOCATE)

This was a well-known constitutional petition under Art. 184(3) of the Constitution regarding contractual and legal obligations of oil Exploration and Production (E&P) companies operating in Pakistan towards the environment and welfare and uplift of areas of their operation. The case focused on the financial and social welfare obligations of oil Exploration and Production (E&P) companies and the under-utilisation of social welfare funds provided by Exploration and Production (E&P) companies in lieu of exploration rights and privileges. The court, amongst other directions and findings, directed that the DG PC (Director General of Petroleum Concessions) should use his enforcement powers under the petroleum Concession Agreements actively and diligently to seek compliance with the terms of such agreements, and that the Ministry of Petroleum and Natural Resources should ensure implementation of the Prime Minister’s directive of 15-9-2003 and provide gas to “all the surrounding localities/villages falling within the radius of 5km of all Gas Fields, on priority basis” as directed, in accordance with the law.

Conclusion

In the author’s opinion, the idea that the energy crisis is a serious infringement of human rights of the Pakistani nation is only the first step in recognizing the mess, which has been created by political greed and bureaucratic corruption. It is encouraging to see that the courts are ready to study the impact of such state failures in responding to basic energy crises on the common man and taking up such matters as a national emergency. It is currently unknown whether the current Supreme Court will be courageous and dynamic enough in 2015 to question the state and the petroleum mafia about the current petroleum shortage as well as continued supply of electricity to affluent housing co-operative schemes, without any regard for the ‘rest’ of Pakistan.

 

Cases consulted

  • Muhammad Asif Vs The Federation Of Pakistan 2014 PLD 206 SUPREME-COURT
  • 2014 SCMR 287 SUPREME-COURT
  • Application By Abdul Hakeem Khoso, Advocate 2014 PLD 350 SUPREME-COURT
  • Engineer Iqbal Zafar Jhagra And Senator Rukhsana Zuberi Vs Federation Of Pakistan and others 2014 P T D 24 ,
  • 2012 SCMR 773
  • Shehla Zia v. Federation of Pakistan PLD 1994 SC 694
  • OGRA through Secretary vs MIDWAY II, CNG STATION 2014 SCMR 220,

[1] https://www.enercon.gov.pk/

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