Power tariff hike

04 Oct 2019

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THIS government has now presided over three separate hikes in power tariffs, aside from the regular fuel adjustment surcharges that are revised and updated as per routine. The latest such hike came on Wednesday, when in one go the government notified a 33 paisa per unit increase, on top of the 53 paisa per unit hike that the regulator had already approved. The additional increase, according to the finance ministry, was to help bear the cost of the subsidy that the so-called ‘lifeline consumers’ (those who consume less than 300 units per month) receive. In what appears to be a sleight-of-hand move, the government has passed on the cost of that subsidy to consumers, thereby freeing up some fiscal space for itself, and at the same time, turning the country’s power sector and its billing and recovery system into even more of a surrogate revenue-collection machine.

These kinds of gimmicks need to be avoided at all cost; whenever the government resorts to them, it needs to be called out on it. Under pressure to keep expenditures down while lifting revenues, the government is behaving like its predecessors as it begins to lean on power tariffs and fuel prices to make some easy billions for itself. When past governments resorted to such practices, they were criticised, not least by Imran Khan himself. But now, the present government itself has retained the benefit of falling oil prices in the global market, rather than passing it on to the consumers who are already weighed down by inflation. Not content with that, it is now passing on the cost of some of the subsidies — and of its own inability to improve system efficiency — directly to the consumers.

Meanwhile, the public is still waiting to learn what the government’s big ideas for power sector reform are. We know privatisation will play a role, but there is nothing yet on how the government intends to improve sector governance, or whether pricing reform is even a part of its vision. There is even less knowledge of what is being done to improve transparency in the power sector. These are mutually reinforcing priorities that are needed to put the power sector on the path of self-sustaining growth. Without pricing reform, investment will always be pegged to guaranteed returns. Without improvement in sector governance, there will always be circular debt, higher or lower in some periods than in others but always present. Without transparency, there will be no meaningful improvement in governance. The absence of any vision for power-sector reform makes tariff hikes even more difficult to bear. At this rate, we will be endlessly raising tariffs to pay for system inefficiency, as well as bearing the associated costs, such as subsidising lifeline consumers; thus there will be no real gain. This is not the way to run things, especially in the power sector.

Published in Dawn, October 4th, 2019