Narrowing power subsidies

In its Letter of Intent (LoI) to the IMF, the government of Pakistan categorically pledged the elimination and reduction of subsidy on the second group of electricity consumers by notifying a 30 percent upfront increase in tariffs. The Technical Memorandum of Understanding (TMU) shed more light on what exactly is the second group of electricity consumers.
Come October 1, the second group will be paying an additional 30 percent for their electricity bills. A noble idea one would think, since rationalising tariffs and moving away from blanket subsidies is the way to go. But the crude fact remains that this step is not going to yield any significant gains as the first group if one may call it-constitutes nearly 90 percent of all domestic consumers.
Just fifteen months ago, lifeline consumers in Pakistan were treated as those using up to 50 units of electricity-hence subsidised; nothing wrong there. But, there seems to be little logic behind raising the bar to 200 units, which would essentially mean an added burden on the subsidy bill.
The LoI says the "tariffs for consumption between 0-200 kwh will be retained for now" suggesting that somewhere in the future the tariffs might be gradually increased. But, thats not the case as the LoI further reads, "in years 2 and 3 of the program, subsidies will be phased out for users above 200Kwh and reduced for all but the lowest consumers in the 0-200 kwh range".
So the government essentially plans to protect almost the entire domestic consumer category from any tariff hike. What we don know yet is whether there will be further segregation within the 0-200 unit range. Things could get worse if the government decides to further lower tariffs for consumers using 101-200 units and equate it to the lowest slab of current lifeline category.
While protecting the poor and offering direct subsidy is the right thing to do-changing the definition of abject poor to gain political mileage isn . The TMU does have a sliver-lining though, as it signalled a 30 percent increase in tariffs form October 1 for agricultural tube well consumers-a category which constitutes nearly 11 percent of the countrys electricity consumption. One hopes, sanity prevails and the subsidy is restricted to the neediest in future.