Transparency & fairness

Published December 25, 2020
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.

A FRIEND’S electricity bill for the month of November 2020 was Rs19,733. Out of this only Rs6,279 was for ‘energy charges’ for electricity that had been consumed in November; the rest was all for taxes and adjustments of one sort or another. There were ‘e-arrears’ of Rs6,812 and a GST of Rs2,225. There are a number of other smaller and/or local charges as well, including one for a ‘TV fee’. The bill also mentioned that there were three different types of extra charges in the e-arrears that were imposed by Lesco, in the billing month of November, which were from October as well as from as far back as July.

How does one even make sense of such a bill? The bill mentions that October had two types of adjustments: ‘ADMC charges’ at Rs0.20 per unit and ‘QTR-TRF-AD charges’ at Rs2.69 per unit. The July charges were ‘FPA charges’ at Rs0.8376 per unit. Can a consumer make sense of these charges? Can they know if these are legal or not, warranted or not, and what to do in case they are being overcharged or treated unfairly?

Why are consumers paying for July electricity in November? How can any billing process allow for such delays? Where is the accountability for the electricity provider here? And what are these adjustments that consumers are paying for? Is this just an attempt to hide power-sector inefficiency by taxing those who are actually paying bills? Were Lesco and other electricity providers not able to get enough from consumers in July, and is this what paying consumers are footing in November?

The lack of transparency goes much deeper. The power sector is not able to pay for all the generation and distribution costs that it is currently incurring. This has been accumulating in the form of rising debt obligation: a part of these are termed ‘circular debt’. But why is the power sector in such a situation? Is it that the price of electricity is being set too low? Or is there too much theft and/or inefficiency in the system? If there is theft, why should paying customers be made to foot the cost, and why should distribution companies not be provided stronger incentives to eliminate theft? If it is inefficiency, should there not be some incentive structure that rewards and penalises power providers to remove inefficiencies over time?

Citizens need information to be able to ask questions about the system.

To say that power-sector issues are complex is not much of an argument. They are indeed complex issues. But do the power-sector players and concerned government departments not have the competence to handle complex issues? If not, are they at least capable of building competence, or is this too much to ask as well? Should we just give up and say the problems are complex and we are too incompetent so these problems will just continue? Clearly, that is not a path we want to be on.

Concerns of lack of transparency and fairness — concerns that underpin the process of developing efficiency, incentive compatibility and accountability — are not just in the power sector. They pervade other areas of government involvement as well.

When we pay almost Rs104 per litre of petrol, what are we paying for? How much of this amount is the price of petrol provision and how much is tax? What percentage goes to companies as profits? We know petrol usage is quite inelastic; is the government using petrol as one of the products that can give them a lot of tax revenue? If so, what is the basis for this taxation? Is there a principle that is being used to determine the rate of taxation, and is that principle justifiable? Or is it just revenue need and bureaucratic processes that are determining the level of taxation? Does the government not owe it to people to share the basis for pricing and taxation for a product as important as petrol?

If a consumer wanted to go from the price of crude oil to what he/she pays for one litre of petrol in Pakistan, this is not going to be an easy journey. Why does the government not make it transparent so people can see what they are paying for and can contest things they do not agree with? Or is that exactly why the government tries to keep it as opaque as possible, so that people might not have the information with which to contest government practices?

When we judge individual outcomes coming out of a system, we judge them at two levels. Was the outcome fair and efficient given the system and set of rules that have been set up? And, at the larger level, we also need to see if the system that has been set up and the set of rules that have been created to produce outcomes are fair and efficient as well.

It might be okay for power producers to say that within the powers they have been given, charging for electricity used in July — even in November, a good five months later — is fine. And that might well be the case. But as a citizen I have every right to ask, should such powers be given to power companies? Is it fair and efficient? Does it not pass tremendous uncertainty and risk onto citizens?

But to ask both types of questions, from within the system and about the system, I need information. The government currently has systems set up to deny access to that information to citizens. This lack of transparency not only erodes possibilities for creating accountability, it erodes trust in government and state institutions.

The arguments were from energy sector, but the problem of lack of transparency and access to information is by default — and, sadly, by design — much broader and deeper. Unless systems are set to share information and allow citizens to question the government and state, there will be little trust in the government’s actions or intentions.

The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.

Published in Dawn, December 25th, 2020

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