December 10, 2002	Tuesday	Shawwal 5,1423

KARACHI, Dec 9: Has Prime Minister Mir Zafarullah Khan Jamali’s multi-party coalition government started recording notes of dissent on the IMF-World Bank framed policies which were pursued with religious zeal by the military set-up during last three years?

This is a question that is being raised in business circles, among politicians and in public at large, after Prime Minister Jamali and his non-PML cabinet colleague Aftab Ahmed Sherpao announced their intentions this week to bring down tariff on electricity, and gas and prices of oil and all other basic commodities. Humayun Akhtar, another cabinet minister, was more than blunt at Lahore Press Club to blame increasing electric power tariff being the main factor to impede industrial growth in Pakistan.

“I have instructed Wapda and the Ministry of Finance to reduce power tariff. I have a desire to do a lot to ease financial difficulties of the common man,” Prime Minister Jamali is reported to have told journalists in Islamabad just a day before Eid. He made it a point to repeat this statement again at his native town Rojhan Jamali in Balochistan where he was spending Eid holidays stating that his government was determined to bring down gas tariff also. Aftab Sherpao, Water and Power Minister in Jamali cabinet, also announced his government’s determination to bring down electric tariff.

Needless to say, the prices of oil, gas, electricity and all other basic commodities went up in last three years because of the IMF-World Bank’s insistence to bring down budgetary gap, increase revenue and bring everything that keeps a Pakistani alive within the GST network. The 10-month Standby Facility with the IMF was enforced with military discipline. Conditionalities worked out with the World Bank and the Asian Development Bank and finally in the three-year Poverty Reduction and Growth Facility (PRGF) with the IMF has pauperized a big section of middle income group people, thus increasing the poverty level in the country.

It is another matter that neither the budgetary deficit could be reduced to the targeted level (it is over 7 per cent of GDP during 01-02) nor the revenue could be mopped up according to the budgetary projections. Revenue target was revised downward thrice during the last budget. It has already been revised this year too. But middle income group people have suffered a lot. Family budgets have slipped out of control.

Prices of basic commodities, transports and house rents, and cost of health care and education have increased manifold in the last three years without any significant increase in take home wages.

But before seeking answer to the question whether Jamali government is showing disapproval to the IMF-World Bank prescription adopted by the military government, the more pressing query is whether this multi-party coalition is serious in taking up this confrontational approach. Or is it a mere political gimmick for consumption of the people?

A relief in tariff on oil, gas, electricity and a cut in prices of basic commodities is a proposal that would impact more than Rs200 billion revenue in current fiscal year’s budget.

Precisely, the 2002-03 budget indicates Rs60.50 billion surcharge collection on gas and petroleum. In its budget, the military government indicated collection of Rs45 billion from petroleum and Rs15 billion from gas.

Sales tax is expected to generate about Rs206 billion, a substantial part of which will be collected at import level. Despite all tax reforms, bulk of Rs148.40 billion direct tax will also be collected presumptively at source and has indirect impact.

“The current government levies on petrol are Rs12.87 per litre representing excise duty and petroleum development levy, while on diesel it is Rs2.76 litre representing petroleum development levy only,” argued the secretary of Oil Companies Advisory Committee (OCAC) in May this year while trying to explain that there were many factors, including government taxes in determining the prices of petroleum products. In the last fiscal year, the government collected a total of about Rs54 billion surcharge on gas and petroleum products. Add to this the impact of 15 per cent GST and the primary and secondary inland freight.

All this add to the petroleum products prices. This has a direct and indirect effect on the overall economy. The transport cost goes up, power generation cost rises as more than 70 per cent of electric power generation is fuel based in Pakistan. A rise in power generation and transport cost push the production cost up which makes prices of goods to touch exorbitantly in domestic market and they are rendered uncompetitive in the export market.

In July this year, National Electric Power Regulatory Authority (Nepra) allowed Wapda to increase consumers’ tariff by 15 per cent, on irrigation tubewells to 18 per cent and 9 per cent on industrial consumers. This is said to be the highest raise in power tariff since 1997. Wapda is seeking a further tariff hike with retrospect effect to meet its obligation towards IPPs.

The Ministry of Finance is also understood to have given an assurance to the IMF to carry out reforms in utilities, including a change in power tariff.

As the present coalition government was about take control of affairs, the Ministry of Water and Power and Natural Resources found it appropriate to announce a further hike in electric and gas tariff. What was the purpose of this announcement and what were the bureaucrats in Islamabad up to? Jamali government will have to probe and find an answer before moving ahead.

Both Wapda and KESC are under control of military officers for the last more than three years. A whole set of military officers are running the affairs. But none of the two utilities — Wapda and KESC — have shown any improvement in operations or in financial affairs. Their line losses are too high to imagine. The receivables are not showing any signs of improvement and, therefore, those who pay their electric bills have become hostages and are compelled to pay more.

An administrative shake-up in Wapda and KESC is, therefore, an essential step before taking up any measure to give relief to electric consumers.

Jamali government has taken up a daunting task by promising people some economic relief in power, gas and oil and basic commodities. It involves a review of whole, macro and micro economic issues, and could have an unprecedented economic impact on the current fiscal year’s budget and implication of Pakistan’s relationship with the IMF and World Bank.

Whether Jamali government is able to provide relief or not, people expect this government to bring all expenditures repeat all expenditures under the close scrutiny of parliament. If people are made to suffer back breaking price spiral, they have a right to know from their elected representatives, howsoever manipulated and rigged elections were, where and how the money is being spent.