AT the beginning of the current financial year, the government must have hoped that the power sector subsidies for the entire fiscal would not cross the Rs120bn mark. That they did shows that our economic managers made a wrong estimate. But even at that time, the sceptics didn’t agree. How could they? The massive line losses had not reduced; theft had not been controlled; electricity prices were not raised to reflect the actual cost; the energy mix was not changed to cut generation costs; and the inefficiencies of public-sector power producers were not checked. The only way to “contain” the power sector subsidies in line with the budgeted amount was to stop generation. Since the government could not use this option, it has ended up injecting Rs200bn into the power sector in less than seven and a half months. Another Rs50bn will have to be provided to Pakistan State Oil over the next few days to avoid disruption to the fuel supplies meant for thermal power stations.
In its annual report on the state of the economy during the last fiscal, the State Bank had sounded optimistic that power subsidies wouldn’t prove to be a drain on meagre financial resources this year because the government had already paid off the accumulated subsidies of Rs391bn or 1.9 per cent of GDP for the last fiscal against the budgeted amount of Rs147bn. The bank is now required to revise its earlier fiscal deficit forecast of six to seven per cent of GDP for the current year. The government has provided over Rs1.2tr as power subsidies, a lot more than the cost of the Diamer-Bhasha project. Yet we don’t have electricity for our homes, shops and factories and find it difficult to liquidate the circular debt that stood at Rs350bn in August. Our economic managers will continue to face embarrassment unless they start implementing crucial reforms to restructure the entire power sector, or, at least, to budget the subsidies accurately. Until then, we should forget about an early economic recovery and the generation of enough electricity to light up our homes and shops and to operate our factories.