Additionally, of serious concern requiring the Prime Minister's attention are some observations in the first review report of the International Monetary Fund dated December 2019 notably that the indicative target for net accumulation of power sector arrears was unmet and urged the government to begin monitoring the following key measures contained in the comprehensive plan prepared in consultation with international partners and IMF staff: (i) timely updating tariffs, including the Q2 FY 2020 adjustment for capacity payments to take place by end January; (ii) streamlining of tariff procedures and reintroducing surcharges via amendments in the Nepra Act to be submitted to parliament by end-December; (iii) improving efficiency and collection; and (iv) rightsizing of subsidies. These four measures have been consistently proposed by the lending agencies and disturbingly the incumbent government, like its predecessors, has focused on raising tariffs, and/or sending bills to connections only on paper which when disconnected on paper may show higher receivables but again only on paper, which impact the households and the productive sectors who use electricity as a major input for production. (iii) measures to improve governance and efficiency of the sector continue to be ignored which essentially implies that it is the consumers who bear the cost of inefficiency and incompetence of the sector. Thus it is hoped that the Prime Minister would also focus on improving governance of the sector rather than tweeting his appreciation for claims by the relevant minister that he has succeeded in reducing theft and increasing receivables.

The government in turn committed to the Fund in the memorandum of economic and financial policies to "improve efficiencies and collections the government will sign performance based contracts with all Discos by end-January 2020. The contracts will contain KPI for improvements in collection, reduction in losses and meeting the regulatory timelines of petitions submissions with mechanisms to reward good performance and/or compensate for shortfall. Discos will submit quarterly performance reports to Nepra and will publish in Nepra's website." Such measures were proposed during previous programme and/or sector specific loans by multilaterals but never implemented due to the challenges, technical as well as legal, facing the authorities.

The government has also agreed to issue new guarantees in the amount of Rs 200 billion to transfer costly CPPA payables to IPPs into the PHPL and absorb PHPL into its budget, fully recognizing the liabilities in PHPL as government debt and taking over the servicing of loans (instead of the current practice of passing interest payments on to consumers as higher tariffs) and reduce stock of outstanding payables from the privatization proceeds of power assets. These measures if adopted in the current year would imply that the budget deficit would rise dramatically necessitating either a massive rise in tariffs through surcharge and reduction in subsidies and/or a mini budget.

The issues facing the power sector are of long standing and very serious but require to be dealt with once and for all. However, this must not imply overburdening the consumers and instead a vigorous campaign to end inefficiencies and corruption must be launched forthwith.

Copyright Business Recorder, 2020