Power tariff issue

The World Bank is again reported to have asked the Government of Pakistan to announce, without further delay, separate electricity tariffs for different power distribution companies. Such a step, according to the Bank, would make the power companies self-sustaining, predictable and independent.
There are chances that after the introduction of this measure, electricity rates in the export-oriented industries would drop and make their products more competitive in the international market.
The World Bank, it may be stated, had recently informed the government that energy cost was one of the principal issues facing the business community, particularly the larger established firms which were having difficulties in getting electricity connections, besides the unreliability of supply.
Frequent outages, in addition to high tariff rates, have generally placed an enormous burden on business and compromised the competitiveness of the country's products abroad.
According to reliable sources, the World Bank has also advised the government to muster sufficient political and financial courage to resolve the power sector challenge through accelerated privatisation in generation and distribution, aggressive cost and loss reducing measures throughout the system and improved rates of tariffs and subsidies. This is possible because there is still a lot of time before the next year's general elections.
The World Bank, it may be recalled, has been insisting for a long time that the Government of Pakistan undertake necessary measures on the above lines due to unending problems faced by the energy sector. This particular sector has the potential of making or breaking the economy but its performance has been very poor due to a variety of factors which need not be recounted here. The financial problems which have been huge and endemic have generally been swept under the carpet by delaying payments to the suppliers or providing large subsidies which are a regular burden on the federal budget. The maintenance of the system has been so disappointing that in order to escape the risk of outages, many manufacturing units are investing in gas or diesel power generators, further raising the cost of production and hampering exports.
Addressing the well known problems of Pakistan's power sector poses an enormous challenge to the government, and the World Bank has all along been working closely with the authorities to make a meaningful contribution and resolve the issues in the sector.
One of its main suggestions in this area has been to complete the process of unbundling of Water & Power Development Authority (WAPDA) into separate transmission and distribution companies. If such a process is to be expedited and all the generation companies are also privatised, separate electricity tariffs would be the likely outcome which the World Bank has long been recommending.
The government, despite agreeing in principle with the proposal, has generally adopted a dilatory attitude on the issue and perhaps for understandable reasons. The implementation of the proposal would certainly result in reduced power tariffs in developed districts of Punjab, Sindh and NWFP and higher tariffs elsewhere in the country. This would be inevitable because of high rate of electricity pilferage or non-payment of dues in the latter regions and consequently higher losses to the DISCOs operating there.
The result of the proposed policy would of course be concentration of industries in developed areas of the country and greater regional imbalances in the economic development of the country.
Such a lop-sided development would certainly not be acceptable to the policy makers. Looking at the totality of the situation, it seems more advisable to try to ensure that tariff rates in different parts of the country remain, more or less uniform, even after the implementation of the World Bank's proposal. For this, the government may have to provide subsidy to certain DISCOs and help them overcome the problems which affect their financial position negatively. All in all, while the World Bank's proposal is certainly sound, the government has to analyse the situation thoroughly and take appropriate measures to neutralise the possibility of its negative fall-out.