The hike in power tariff, announced by the government, undoubtedly is going to hurt consumers and, therefore, for obvious reasons is not going to go well with them. Such decisions are always unpopular and no government, particularly a representative government, would ever want to take such harsh decisions, unless they are dictated by inescapable economic realities and circumstances beyond its control, or if it is convinced that such decisions would prove to be the harbinger of future prosperity.
The flak being hurled at the government for raising electricity rates is reflective of only one side of the story; that is the impact that it is going to have on the consumers immediately. Rather than an objective appraisal of the contributing variables, dilemmas faced by the government and the long-term benefits that will accrue as a result of the harsh, but realistic approach adopted by the government.
Unfortunately those who are responsible for building an informed public opinion on issues of national importance, are trying to criticise the government for their own specific political motives. Their endeavours are characterised by the propensity to play to the gallery rather than helping the public to understand the rationale behind this policy of the government.
The fact of the matter is that we are living in a world with interlinked economies. Any development on the international level therefore invariably impacts all the economies in varying degrees, depending on the strength and versatility of the concerned economy. The fluctuations in the price of oil, in particular, do affect the industries dependent on the use of oil as a source of energy.
It is an undeniable reality that the power generated through thermal, nuclear and hydel resources is not enough to meet the snowballing requirements of the country. The avenues of enhancing hydel power-generating capacity have been blocked due to political reasons.
No power-generating capacity was added during the last 12 years. Consequently, the present government inherited a shortfall of 3500 MW of electricity, which was badly affecting business and industry.
There was a massive power load shedding across the country, factories and plants were closing down, manufacturing businesses and exports were in the nose-dive mode, triggering widespread unemployment. There were riots on the streets; trains and public property were being burnt by the agitated masses. The situation needed to be addressed on priority basis.
The government, it must be mentioned to its credit, did not waste any moment in initiating steps to tackle the problem in the short run as well as well to find plausible solutions to this chronic irritant on the long term basis. The Prime Minister Syed Yousuf Raza Gilani in his very first address to the parliament after his unanimous election had announced to deal with this problem on priority basis and also outlined his strategy to deal with the situation.
It is encouraging to note that in line with the vision of the Prime Minister , the government has been able to add 600 MW of electricity to the system by establishing three plants of 200 MW each and another 1000 MW will soon be available for integration into the national grid system.
Another very bold and realistic decision taken in this regard is the installation of rental power plants which provides the best available choice to mitigate the suffering of the people and to bolster the fledgling industry in the short run. Shortly 250 MWs will be added to the system through the rental power plants set up so far.
The rental power plants take 6-8 months to be installed as compared to IPPs time span of 3-4 years. However, this decision of the government has been severely criticised by some political circles and even the media, maintaining that this arrangement would cost more than the IPPs.
The critics completely neglected the reality that the damage accruing to the economy due to the shortage of electric power was much greater in proportion to the costs that will have to be endured to ensure generation of power through the measures proposed by the government. They also failed to appreciate the off-setting impact of the refurbished industry.
The government in fact was faced with a dilemma whether to allow the situation to pummel the economy and add to the miseries of the masses or take the bold and harsh decision to rectify the situation. It rightly opted to go for the slightly expensive mode of generation of electricity rather than presiding over country's drift to darkness and economic ruin.
All these new initiatives for generation of electric power are oil-based and therefore, the increases in the international oil prices do affect the cost of generating electricity necessitating frequent adjustments in the tariff. One thing to be noted is that the power sector is not in the business of earning profits. PEPCO aims to break even with the consumers.
To keep the power generating and power distribution companies in the business, costs have to be met. It is in recognition of these realities that NEPRA has been authorised to make periodical adjustments in the power tariff. It not only makes upward adjustments it also makes sure that any decrease in the costs is also passed on to the consumers as it did in August 2009 by reducing per unit cost by 13 paisa.
Another worth mentioning aspect is that the government is committed to sharing some of the burden of the consumers. It has set aside Rs 55 billion to cover for cost adjustments during 2009-10. The perception that subsidy to the lifeline consumers and the agri-tube wells has been withdrawn, is not correct.
To the contrary , cross subsidy to both these categories continues to be given which during the current financial year is calculated to Rs 14.6 billion and Rs 42.2 billion respectively. The tariff for both these sectors is significantly low as compared to the average percentage cost of power at consumers end, as Rs 9 per unit.
Another redeeming feature of this price adjustment mechanism is that the government, instead of agreeing to recover the total cost amounting to Rs 630 billion calculated by NEPRA, has only allowed Rs 400 billion to be made good. The gap of Rs 230 billion will be provided through government subsidy and other sources.
Besides the oil prices, the other factors that affect the price structure are the yawning gap between demand and supply and the culture of theft of electricity. As is evident from the foregoing, the government has already taken concrete and imaginative steps to bridge that gap.
Steps are also in the offing to ensure that the burden of non-payment and illegal abstraction of electricity does not hurt the rest of the consumers and the law-abiding citizens. In this regard, the government has declared 2010 as "The Theft-Eradication Year ".
During the last three months of this campaign, action has been taken against 54,320 consumers and FIRs have been lodged for the recovery of Rs 3.1 billion. This action hopefully will improve the present efficiency of the distributing companies (DISCOs) and the level of service provided by them. Once their efficiency and revenue earnings increase, its benefits shall surely be passed onto the consumers.
As is evident the government actions in regards to tiding over the power shortages and the adjustment in the tariff structure are fully justified and in line with its vision and futuristic approach. The nation is passing through a difficult period and everybody has to share the responsibility of stemming the rot and ensuring a prosperous future. That indeed requires hard choices and sacrifices.
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