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A long wait: Energy policy

July 22, 2013

THE ‘energy policy’ we are hearing so much about is beginning to appear like an elusive mistress, revealing itself only in glimpses. It has been over two months now since we were told that a working group had been formed, that a large plan was being hammered out, and that a comprehensive set of reforms, aimed at resolving the country’s power crisis on a permanent basis, would be unveiled. Since then we’ve seen a retirement of the circular debt to the tune of Rs326bn — in a surprise move only days before the close of the last fiscal year — and further talk of tariff hikes beginning with industrial and commercial consumers. And now we’re hearing talk of full-scale privatisation of the various power utilities in both generation and distribution.

All of this is good in one sense. Retirement of the circular debt was indeed essential before undertaking any meaningful reforms. Tariffs do need to be reformed to close the gap between the cost of generating electricity and the cost at which it is sold. Without closing this gap, the circular debt would come back within a few months, just like it has done in every other instance of full-scale retirement of debt. Closing this gap means raising the cost at which electricity is sold; but it also means bringing the cost of generation down by raising efficiencies. And today there is hardly anybody left who believes that the power bureaucracy can do much to raise efficiencies, meaning the induction of private management is going to be key to the whole process.

So it is a good thing that the government is talking about these measures, and it is also a good thing that it appears to have the sequence right. What is missing in all this is the policy itself, the deeds that make the words meaningful. Now we are told that the policy will be taken to the Council of Common Interests before it is unveiled. Broadening ownership is a good idea, and it would be helpful if the provinces desist from being merely obstructionist. But given the hype and the amount of time that is going into this affair, we are entitled to expect that we would have been further down the road by now. Delaying bitter medicine is never a good thing. Some delays are to be expected, but the government also needs to be careful that it is not left forever in search of that other elusive mistress: consensus.