PRIME Minister Shehbaz Sharif’s promise to significantly reduce the extremely high power tariffs in the next few days should be taken with a pinch of salt.

On Independence Day, Mr Sharif acknowledged that the electricity bills were everyone’s foremost concern, and that without reducing power tariffs, Pakistan’s industry, agriculture, and exports could not grow. He said that the government was working round the clock to rectify matters, and that he wanted to ensure ‘maximum relief’.

Similar statements have been given by Energy Minister Awais Leghari in recent weeks amid growing criticism of the government’s expensive power purchase contracts with IPPs by the powerful textile lobby and some political parties. The only difference is that the minister sees electricity prices decreasing from January — not earlier. How Mr Sharif plans to deliver this miracle in the coming days, or even months, has not been explained.

Indeed, the contracts with the IPPs offering high guaranteed profits to their local and Chinese owners are an issue, but they are only one part of the problem. The issue is complex, with many other factors contributing to our higher-than-regional electricity prices. The government says it is mulling various options to cut power generation costs, such as shifting three coal plants from imported fuel to Thar lignite.

However, these and other solutions will take time before we see any meaningful reduction in generation costs, if at all. The biggest problem is that the challenge of electricity tariffs is largely linked to our overall fiscal troubles and the severe dollar crunch that has led to a sharp depreciation in the value of the rupee over time. This has caused a spike in the cost of imported fuel used to generate electricity, as well as dollar-indexed costs and profits of power producers in recent years, resulting in higher electricity rates for all consumers. Can Mr Sharif, or anyone else, bring down electricity prices even a bit, without actually tackling budget issues and dollar liquidity? That is unlikely.

The good news is that the government has prepared a ‘home-grown economic strategy’, focusing on export-led growth and the removal of continuing economic bottlenecks to achieve 6pc annual growth, with the help of a foreign consultant. The bad news is that the authorities seem to be second-guessing the plan as it is likely to hurt the business interests of Pakistan’s rent-seeking elite; this was evident to many when it deferred its promised announcement on Independence Day.

Nonetheless, the sudden unexplained delay in the announcement of the new economic reform plan is not reason enough to suspect the government’s intentions. Rather, it raises concerns about vested interests wielding their influence to protect their benefits. Still, we must keep our fingers crossed as perhaps the age of miracles is not over yet.

Published in Dawn, August 16th, 2024