The politicians in the federal and provincial governments are playing ping pong to counter the rising electricity prices. Before the elections, almost all the coalition partners promised to provide electricity to consumers in the lower bands (below 300 units monthly consumption). However, the reality, as expected, is that the prices are going to increase substantially – the general rule of thumb is that the lower the slab, the higher the percentage increases.
When the people and media are bashing ruling parties for not fulfilling the promises, they attempt to pass the buck to the power distribution companies. That is unfair and potentially derails the privatization and deregulation of the sector.
The transmission and distribution sector requires massive investment to ensure adequate supply of the increased power capacity and to reduce the losses. And for that, private sector investment is envisaged. However, with ruling party representatives demanding discos to share the financial burden of subsidy, the investors will only run away from making any commitments.
Politicians want adequate power supply and lower prices at the same time. They cannot have the cake and eat it too. One recent example is when Federal Minister Power Awais Laghari said in the senate that the government was willing to supply 10,000 MW to Baluchistan while simultaneously stating the province is running an annual loss of Rs600 billion.
This national conundrum of insufficient cash flows and circular debt is again putting the country in a fix in peak summer. Shortfalls are increasing and while the situation may be under control in major urban centers the load-shedding in the country have risen.
One saintly suggestion in Sindh to counter the problem was to ignore the losses and supply electricity in the public interest. Perhaps this is because, unlike X-DISCOs, private entities will have investors to cushion the loss, so it’s assumed that financial dips will be a blip in their pockets.
This mindset is troublesome especially as the federal minister also announced that X-DISCOs will be privatized within 18 months. Are you expecting local groups or international businesses to change their model based on season and operate like charities? The answer is simple, no.
Then this mindset also overlooks the second leg of the problem - the costs of electricity. The national tariff is going to go up very soon. Across Pakistan, there is resentment of bills that are unaffordable despite prolonged load-shedding. And it’s going to go up further.
The consumers with 10 hours of load shed cannot afford to pay for the remaining 14 hours of power they receive. The additional electricity will make it worse. The short-term gain of unlimited supply will hit the government in circular debt and subsidies too. It becomes a futile exercise.
There is a case to be made for those people who pay bills regularly but face load-shedding. This is a challenge on a national level and must be addressed through improved governance. Govt has been cracking down on thieves and lodging FIRs but beyond the initial success of 2 to 3 districts being declared load shed free there hasn’t been tangible progress
The government needs to work with DISCOs to improve governance. Installing smart meters in IESCO and LESCO is a good start. KE has already done it at the PMT level and this needs to be expanded with investment. Then the government has primary responsibility towards citizens and should be using its available resources to lower the cost of production so customers can use more.
The state should also consider using its development funds at such points. Many made promises of free electricity to the people during campaign season and have now balked at the financial undertaking involved.
Another elephant in the room to address is the network constraints that could enable unlimited electrons to flow through the network, which have not been fully, addressed creating bottlenecks in the system. Again, the answer is investment and not philanthropy.
Expecting the power sector to take moral high ground is akin to running it into the ground sooner. There is a viable model to look at next door. The Delhi government has created a system where customers can opt-in to receive a subsidy. Consumption of up to 200 units is free. Consumption of 400 units is subsidized 50 percent. This is achieved by a budgetary provision of approximately 3300 crore Indian Rupees.
Let the provinces and cities take the subsidy and generate internal revenues to finance it while attracting investors, and investment, and bringing in efficiency should remain a separate focus area.
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