IN the midst of loadshedding, electricity rates have been increased once again. In a relentless sequence of tariff increment, it is the seventh hike in electricity prices over the last three years.
Not only will this decision prove counter-productive it is also ill-timed — the increment has been announced while the shortfall approaches the 5,000MW mark and violent demonstrations are being held against loadshedding in the country.
As part of the move to address its losses and financial deficit, reforms have also been announced for the power sector. The Pakistan Electric Power Company has also been dissolved and distribution companies are being made more autonomous.
According to Minister for Water and Power Raja Pervaiz Ashraf, the fuel-mix formula for power generation is to be improved by further tilting the balance towards gas.
It is yet another example of artificial and reckless decision-making. The announced plan for restructuring the power sector is only of cosmetic value but with numerous ramifications. It is not the departmental makeup of the power sector that is a hindrance to its progress but the financial and administrative irregularities and malpractices. It is issues like financial corruption, nepotism, political interference and the incompetence of people in key positions which have undermined the power sector.
It is this matrix of problems which plagued the Water and Power Development Authority (Wapda) — once a model for the developing world — to such an extent that it was labelled as a white elephant in the 1990s. Particularly, distorted policies and decisions by regimes over the last three decades have brought it to the verge of financial bankruptcy.
Tackling these ills is imperative if we seek meaningful change in the performance and efficiency of the power sector. In fact the plan to restructure the power sector smacks of traditional tactics of delay as non-issues are stressed and the facts hidden.
Similarly, the decision of tariff hike and a shift towards gas are bound to prove counter-productive. A tariff hike by no means is going to improve the situation. The ongoing energy crisis in terms of severe loadshedding and tariff hikes has already caused a number of industrial and economic activities to grind to a halt in the country. Tariff hikes only add to the woes of the general public while corrupt elements and electricity thieves, that are believed to include representatives of large industrial groups, multinationals and the ruling elite, can only be further encouraged to continue with power theft and other forms of corruption in this sector.
An over 50 per cent increment in electricity prices over the last three years does not appear to have eased the situation in terms of the financial deficit of the power sector. Going by the government’s reports and by what is obvious, we see that hundreds of thousands of people have lost their jobs while the annual loss to the country’s industrial sector alone is over Rs250bn, thanks to the energy crisis.
The solution of power deficit is not in tariff hike but in the eradication of the deep-rooted financial corruption and control of transmission and distribution losses. For Wapda, these losses are reported to be over 35 per cent in many regions and 23 per cent at the country level. The situation at the Karachi Electric Supply Company is even worse where losses stand at over 40 per cent. These losses must not be more than 10 per cent. Given the level of losses and the tariff structure, the countrywide financial implications in 2008-09 are estimated to be over Rs225bn.
Careful estimates suggest that by controlling theft alone over Rs100bn can be saved annually. Renovation of infrastructure can bring an additional Rs50bn of savings. Also, by controlling these losses, around three million new connections can be provided.
The water and power minister’s attempt to dismiss the wider economic impacts of the tariff hike by saying “Its only a small increment” suggests that he has little understanding of the snowballing effect of this increment nor does he comprehend the dire financial situation of the common man. It is not just the increment in utility bills that the already wretched masses would have to bear but the consequent jump in prices of food, transportation and all other necessities. It has yet to strike him what a huge part loadshedding and tariff hikes play in the closure of industrial and commercial entities, the consequent joblessness, even suicides.
The decision of increasing the share of gas in the generation mix is also unjustifiable. Pakistan’s limited natural gas reserves do not allow such a move at all. The nation is already facing enormous implications of this strategy — households and industry are already facing up to 20 hours of gas loadshedding during the winter months primarily because of increased consumption of gas in the power sector. No doubt, a change in the fuel supply equation is essential but it should be a sustainable one. Coal has to be exploited. Similarly, the share of hydropower should also be substantially increased. The announced attempt to increase gas consumption in the power sector will be rubbing salt into the wounds of the domestic and industrial sectors.
The reformation plan is actually a recipe for further chaos. Such decisions are actually part of the problem rather than the solution. The concerned decision-makers must exhibit pragmatism and professionalism and stop misleading the nation by shying away from the real issues and presenting non-issues as issues.
The writer is a lecturer in renewable energy at the Glasgow Caledonian University, UK.