LAHORE, Sept 30: The unprecedented hike in power tariff will spell disaster for people on three counts: a direct increase of 30 per cent, a similar rise in taxes on bills and withdrawal of slabs for those using less electricity.
Experts say the government decision will simply take electricity out of fiscal reach of most of the people.
“The withdrawal of slab system will alone jack up bills by 90pc,” says a former head of the Pakistan Electric Power Company (Pepco).
Add 30pc direct increase, and people in the lower middle class (consuming between 300 and 450 units) will see their bill going up by 120pc. Add another 22pc of taxes, and see the amount they will be paying.
“This is political and financial naiveté at its worst,” he says, adding: “The PPP government tried in 2009 to do away with the slab system for over 300 units. The entire country was engulfed by protests and the government had to form a high-level committee, headed by Raja Pervez Ashraf, which advised the government to restore the slab before it was too late and the government complied with it quickly.”
Now the PML-N government has reduced the slab to 200 units. How people would react, the government may realise soon, the former Pepco chief warns.
“What makes the increase much worse than it looks is the fact that the PML-N appears to have totally forgotten other options for containing the crisis,” says a former member (power) of Wapda.
It has acted under pressure from the IMF conditionalities rather than being more proactive. It could have easily provided gas to the sector and lowered tariff by 60pc. By allocating over 700 million cubic feet gas it could have generated 2,800MW at Rs5 per unit against Rs15 from thermal sources.
By providing only 152 million cubic feet gas to some efficient plants near Lahore the government will start getting 840MW and avoiding the highest cost of generation and lowering pressure on tariff.
“The PML-N has not even talked about the gas option in its first 100 days in government and readily increased tariff by a socially dangerous 30pc in one go. It appears to have collapsed under the weight of the IMF rather than being more imaginative at local solutions,” he regrets.
The second option the government has forgotten is the conservation option, says a managing director of Genco Holding Company. The country, on an average, saved around 1,000MW in three years (2008-10) and the government simply ignored this option.
After an energy summit in 2010 also, the saving went up to 1,350MW. Both these factors (gas and conservation) could partially take price pressure off because the planners can stop generating highest cost electricity. Such options were not even discussed during the first 100 days of the present government. The only thing it talked about was to “rationalise tariff as being dictated by the IMF and other international financial institutions” and had acted at the first available opportunity.
The government could have at least capped its tax volume on the sector and correspondingly lowered the tax rate, without affecting total revenue. It has not done even that. The only option it looked at and executed it is increasing tariff and being creative to create a three-dimensional impact without mentioning it. This is bad politics and even worse economics.
