It is happening again. Rising electricity bills have been a cause of much pain to the working classes and small traders already crushed by the continuously increasing cost of living, with thousands of power consumers pouring onto the streets in cities across the country to vent anger.
The headline inflation rose by 27.4 per cent last month, easing slightly from 28.3pc in July, but the food inflation stood above 38pc, the new Pakistan Bureau of Statistics (PBS) data shows. Many insist the PBS data is defective and doesn’t reflect the actual prices.
The interim setup under caretaker Prime Minister Anwaarul Haq Kakar blamed the $3 billion bailout agreement with the International Monetary Fund (IMF) for the surging electricity prices based on the conditions of the short-term programme’s goals.
Interim finance minister Shamshad Akhtar warned last week that Pakistan’s economic situation was ‘worse than anticipated’ and the government did not have fiscal space to provide subsidies to the inflation-stricken people. She made these remarks during her first appearance before a Senate panel on finance, asserting that the caretakers had inherited the IMF programme, which was “non-negotiable”.
As per Nepra, the average tariff is Rs29.78 per unit, but the rate consumers bear is Rs50 because of taxes, government freebies, system losses, subsidies and bill recovery shortfall
Later, Mr Kakar, who had promised relief to the power consumers, also told the people that they had no option but to pay their (inflated) bills. He also termed the inflated electricity bills as a ‘non-issue’, saying the protests were politically motivated, with some parties trying to exploit public anger against high electricity prices and inflation to improve their electoral chances.
His statements indicate that the government has no immediate remedy to ease the pain of the low-middle-income segments of society struggling to survive through a highly inflationary environment.
As consumers received their bloated August electricity bills, the public anger also turned to power sector employees, judges, and civil and military bureaucracy enjoying the facility of ‘free electricity’ at home at the cost of common people. The issue was also debated by the Public Accounts Committee (PAC) and Senate in recent months, recommending withdrawal of the facility to all government officials and employees from grade 16 and above as its burden had been borne by consumers who aren’t entitled to such perks.
Power Division secretary Rashid Langrial was reported by the media to have told a presser that the government planned to end the free electricity facility for every government and power sector employee, but nothing has been done so far. In fact, the secretary had reportedly informed a recent cabinet meeting that the impact of the facility was less than Rs10bn a year and, thus, its impact was negligible (on the budget and electricity tariffs).
Due to a lack of transparency and data, it is hard to calculate the exact cost of free electricity being provided to government officials, power sector employees, judiciary or the military. The Power Division says 15,971 employees from grades 17 to 21 use seven million units of free electricity per month, and 173,200 employees from grades one to 16 use 330mn units of free electricity per month.
Nepra’s State of Industry Report for 2022 says the serving, as well as retired employees of power distribution companies (Discos), generation companies, National Transmission & Despatch Company, and Water and Power Development Authority (Wapda) Hydro, are entitled to the facility of free electricity units corresponding to their pay scales.
The amount of free electricity being provided is steeply increasing, reaching around Rs6.4bn, excluding Wapda employees in FY22 due to higher electricity tariffs, it adds. The Discos and other public power companies charge this amount from their consumers as part of their tariffs determined by the National Electric Power Regulatory Authority (Nepra).
A Pakistan Electric Power Company (Pepco) official argues that “the total cost of free power being supplied to the power companies was not more than Rs24-25bn at the current tariff”, which is negligible when compared to Rs2 trillion worth of capacity payments made to the generators or more than Rs1tr fuel cost for generation.
That is not all. The Nepra report shows that electricity consumers are also paying heavily for the pension benefits of retired employees of these power companies. The report mentions the total pension benefits, including free electricity, of the six Discos — Gujranwala Electric Power Company (Gepco), Quetta Electric Supply Company (Qesco), Hyderabad Electric Supply Company (Hesco), Sukkur Electric Power Company (Sepco), Multan Electric Power Company (Mepco) and Peshawar Electric Supply Company (Pesco) — charged in their consumer tariff amounted to Rs9.8bn in 2017 and are projected to surge to a Rs48.4bn in 2025.
Even Nepra doesn’t have details of such expenditure being borne by consumers of much larger Discos — Faisalabad Electric Supply Company (Fesco), Islamabad Electric Supply Company (Iesco) and Lahore Electric Supply Company (Lesco) — and their impact on the consumer tariffs.
Additionally, a Pepco official told this correspondent that electricity consumers of Azad Kashmir and erstwhile tribal areas of Khyber Pakhtunkhwa are also getting significantly ‘subsidised’ power. Azad Kashmir is being supplied power in bulk by Gepco, Pesco and Iesco.
The tariff is called “Bulk Supply”, which is considerably less than the domestic tariff in the rest of Pakistan. The federal government and the respective Discos are paying half of the tariff. Likewise, the tribal areas are also supplied power in bulk by The Tribal Areas Electric Supply Company (Tesco). Most of the tariff, however, is subsidised. Even that is only partially recovered because of the security conditions in those areas.
The consumers are not just paying for free electricity being supplied to the privileged ones through their power bills or tax money. They’re also bearing a heavy cost in their bills of 17.3pc (FY22) — much higher than 13.4pc allowed by Nepra and almost a 10pc shortfall in the recovery of the billed amount.
It is not clear how much of the receivables of Rs1.68tr of Discos from government and large private consumers are being charged through the consumer bills or with the taxpayers’ money, though.
On top of everything, taxes and government fees and levies form almost a third of the consumer bills. The Nepra report says a “catharsis of the electricity prices indicates that through electricity bills, the government has imposed various taxes, charges, and fees, which are not directly related to the electricity sector.
“Certain surcharges are also imposed on consumers that are not linked to the consumption of electricity, and a few surcharges are being imposed to overcome the system inefficiencies. All these factors increase the volume of the overall price of electricity. Higher power tariffs also enhance the taxes and duties, which infringe on the basic right to electricity.”
With the average tariff of Rs29.78 per unit for the present fiscal year as determined by Nepra, the cost of much above Rs50 per unit is being paid by the consumers, showing the overall impact of the freebies being distributed by the government to different segments of society, system losses, subsidies for certain categories of consumers, bill recovery shortfall, etc.
The impact of free electricity may not be much as of today, but the burden it puts on users along with various overheads justifies public anger against massive perks the ruling elite are enjoying while working classes are left to cope with real impact of the IMF-mandated adjustments and spiking prices, as well as fend for themselves because, as the caretaker finance minister said the other day, the ‘government’s hands are tied by the IMF agreement’.
Published in Dawn, The Business and Finance Weekly, September 4th, 2023