Pakistan has a power sector circular debt problem. It also has an imminent water crisis looming on the horizon. The two are more interconnected than many might believe.
A classic case in example is the provision of subsidy to tube-well owners. Granted, it might be a well-intentioned move on the part of policymakers but it is important to see its impact both on power sector debt accumulation as well groundwater depletion.
This holds especially true for already water stressed areas such as those in Baluchistan. The government has been providing a subsidy to Baluch farmers for tube wells as far back as the early 2000s.
Tube-well owners initially paid only Rs4000 which was subsequently increased to Rs6000 and then Rs10000 per month under the revised mechanism in 2015 for the province. But this sum is still paltry and the rest of the amount was shared by the federal and provincial government under a 40:60 ratio for a bill of Rs50000 per month.
But even the subsidised amount was not recovered with arrears for only CY17 reportedly accumulating to Rs30 billion against agricultural consumers in the province. The Power Division has taken up the matter of the now total Rs218bn arrears outstanding against federal and provincial governments and Baluch farmers with the ECC. This amount is almost one-fifth of the entire circular debt receivables!
Now the impact on water depletion. As the subsidies usually encourage more use of a resource, there was rampant installation of tube-wells in the province. An excellent analysis has been done in the paper titled “A case of groundwater depletion in Balochistan, Pakistan: Enter into the void” published in the Journal of Hydrology: Regional Studies in 2015.
It describes how the excessive use of three hundred agricultural wells led to the depletion of alluvial aquifers in Kuchlagh, Baluchistan. As the groundwater tables fell in the region, the local population adapted by drilling deeper in a “race to the bottom” according to the authors of the study. The initial reason for over-extraction of aquifers was to provide water for apple cultivation and other high value commercial horticulture.
However, despite clear signals of depletion of the aquifer no regulation for water-efficient farming took place by either the farmers or the state. Instead the provision of subsidy to tube-well owners encouraged the aquifer collapse.
Another important issue highlighted in the study was that adaptation resulted in some well-owners selling water to urban consumers as well. The whole point of the subsidy is defeated if the water being extracted is used for non-agricultural purposes. These issues are also not specific to just Baluchistan but across other provinces as well.
Last year, the previous government decided to install solar power tube wells to replace the 30,000 existing conventional ones. The new government must not implement this as it will only serve to accelerate groundwater extraction and Baluchistan’s drought situation will only worsen as the Kuchlagh experience teaches us.
The result of subsidisation has already led to rising circular debt, depletion of water aquifers and consequentially threatened human life and food security as well. Instead the way to go would be to gradually phase out these subsidies and instead utilise that amount to support and encourage farmers to implement sustainable farming and irrigation techniques. The ECC should do a comprehensive cost-benefit analysis which will surely lead the body to reconsider extending the subsidy.
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