Same old story

EDITORIAL: Perhaps successive governments have simply failed to understand the power sector circular debt issue from the consumers’ point of view.

Fiscal Year 2022-23 was just one more example because even after raising prices twice, in keeping with IMF’s (International Monetary Fund’s) “upfront conditions”, all revenue gains were lost to the same old mix of inefficiencies, theft and losses incurred by power distribution companies; resulting in a gross increase in the circular debt of Rs 789 billion – Rs 66 billion per month!

That means, of course, that not only has all the effort in hammering out tax and subsidy arrangements with the IMF gone down the drain but, more importantly, the people’s lives were made miserable with nothing to show at all.

Let’s not forget that this was not their burden to carry to begin with, because the power sector’s corruption and inefficiencies, and hence the circular debt, are a direct result of the breakdown in the government-bureaucratic machinery.

But since the axe naturally fell on them, and they were made to pay very high rates in the thick of the worst employment and inflation outlook in the country’s history, they aren’t pleased – to say the least – that all those sacrifices were for nothing and the whole process must begin all over again.

This is exactly what concerned quarters, this space included, warned about when the government was going about toggling prices without initiating necessary reforms. Now, since we’re in the middle of another programme with the Fund, there’s every reason to expect even stricter conditions from the lender.

First, prices were raised by Rs7.91 per unit, then another Rs8 per unit, then there was a debt servicing surcharge of Rs3.23 per unit, and then agriculture and industrial sector subsidies were withdrawn. These increases pushed prices to over Rs50 per unit amid regular headlines about lower income consumers receiving electricity bills higher than their monthly salaries.

And yet we’re back to square one, with the political leadership and civil service departments able to offer nothing more than their long faces when asked about the many problems of distribution companies.

All they did in the previous year was make power supply more expensive while plugging none of the holes that have been draining it and bloating the debt. They have not been able to reduce losses or meet revised targets, they have not been able to cut down on theft and they have simply failed to improve recovery of bills.

And there’s nothing to show that whichever party comes to power will be able to do these things even though everybody’s pretty sure that the Fund would want the screws tightened further (read more price increases) going forward.

Pakistan’s leaders need to be schooled in fiscal responsibility. In the present economic/financial environment, especially, tax and subsidy adjustment achieves little if structural reforms are not undertaken first. And the sorry story of the power sector shows that government policy and civil service operations need deep reforms of their own before they can do much about sectors they are trying to straighten out.

The longer these reforms, up and down the government structure, are delayed, the more ordinary people will bleed for no reason at all. It’s clear that no matter how serious the circular debt has become over the years and decades, and no matter how grave Pakistan’s economic circumstances are, it’s never alarmed any government enough to put its foot down and take the hard road to reforms.

This attitude has run its course. The country is already hanging onto the bailout arrangement by the skin of its teeth. If it can still not get its own house in order, it will soon have to forget exogenous funds that it cannot do about. And it must also consider, of course, how ordinary people might one day react when they’re just pushed too far.

Copyright Business Recorder, 2023