LAHORE: With a staggering increase of 46.77 per cent in electricity charges about to be included in monthly bills, sectoral experts, economists, sociologists and politicians across the divide have a consensus: “It will have a catastrophic impact on an overwhelming majority of Pakistanis.”
The National Electric Power Regulatory Authority (Nepra) has already approved a hike of Rs7.91 per unit in the base price — from the current Rs16.91 to Rs24.82 per unit — and the government is about to notify it to take effect from the new fiscal, if not notified earlier.
The normal tax rate on electricity bills is around 22pc, adding which would jack up the per-unit cost by another Rs5.46 — taking the effective rate to Rs30.28 per unit for domestic consumers.
“It is going to be a social and economic disaster; pushing a few million people further down the poverty line, reducing the middle class and increasing the lower middle, hiking the crime rate and deepening social chaos,” said Muhammad Shabbir, a professor of sociology.
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The government may not benefit either, as electricity theft will go up substantially, if not correspondingly, neutralising the intended impact. Along with theft, corruption would add up significantly. He said these kinds of burdens would quickly turn into an existential challenge that the majority could not meet. Add similar pressures from two other (oil and gas prices) sources, and the fears of social chaos would assume a tragic proportion, he alarmed.
“The electricity price increase will be a multi-pronged and multiplying tragedy: shopkeepers will pay more bills and ask for higher rates. Hotel owners will now pay additional bills and add them to customer charges. Expect even vulcanising shops to ask for more because running their machines is now becoming costlier. People will suffer, and their sufferings will be permanent fodder for the media to lament on a daily basis. Given the kind of governance the country is experiencing, no one will know the actual impact of the increase and what is being passed on to hapless consumers,” warned Muhammad Ramzan, who ran a showroom and an eatery in the city.
“The most lamentable part of this increase is that it was avoidable,” insists Dr Farrukh Saleem, an economist and a columnist. Had successive governments been able to improve their bill recovery over the last few years, they could have reduced sectoral losses and escaped lenders’ pressures for increasing the price of power. The recoveries are stuck at 90pc of the billed amount, and the unrecovered 10pc meant Rs150 billion a year. Add another Rs300bn lost to theft and the sector loses its commercial viability.
“The tragedy has been unfolding that we, as a nation, have not been able to check. Instead of improving efficiency, we have always depended on tariff increase, which quickly loses its utility, as recoveries drop and theft increases, bringing the sector back to square one,” lamented Dr Saleem.
Experts, however, believed the increase would not help the sector nor would it hurt people as much as being generally feared. “Nepra has a three-pronged mechanism to adjust electricity tariff, i.e. monthly, quarterly and yearly adjustments. It considers nine variables — including fuel price, dollar parity, operation and maintenance charges — while deciding the price. If the dollar reference price is increased now, it will have zero to little impact on the subsequent adjustments. Similar is the case with oil prices; if base reference price is increased in the current determination, future fuel cost adjustment will come down correspondingly. Prime facie, all these adjustments will be readjusted over the next fiscal,” claimed a former head of the Pakistan Electric Power Company (Pepco).
“However, this kind of exceptional and sharp increase reflects a failure on the part of the regulator — Nepra. It raises serious questions about its role as a protector of public interest. When it had options of monthly, quarterly and yearly increases, why has it rolled them all out in one step and increased the price in one go? It could, rather should, have staggered the increase over a year or so. It is the abject failure, or capitulation, on the part of the regulator to burden people upfront,” remarked a former officer of Pepco, who had been involved in the tariff determination process.
Published in Dawn, June 12th, 2022