The ruckus surrounding NEPRA’s hearing regarding the proposed changes to K-electric’s tariff highlights how political ambitions overcome economic pragmatism. The meeting failed to discuss all issues since workers of certain political parties hijacked the meeting and the discussion ended in a verbal bout amid slogans of “Death to K-electric!” In all of this sadly, the ones to lose out are K-electric, as a vital enterprise, and the people of Karachi. Since its privatisation, K-electric functioned on a flexible Integrated Multi-Year Tariff (IMYT) which relied on a performance based structure for tariffs. Recently, NEPRA fixed K-electric’s tariff at Rs. 12.07/kWh, down 22.5 percent from the present Rs.15.57/kWh. On the surface, this should appear as a wise move to ensure consumers do not have to pay high tariffs.Dig a little deeper, and it becomes clear that such a base tariffcan significantly hurt K-electric’s performance. To put it simply,a base tariff of Rs.12.07 ensures that K-electric will incur losses. In fact, the immediate impact of the reduction will be a total loss of Rs. 45 billion to the company. K-electric relies on a business model which reinvests any profits it makes. This reinvesting has allowed K-electric to optimise production and distribution of electricity and hence significantly improve electricity distribution in Karachi. A reduction in tariffs for NEPRA, therefore, is a political move — one that may be designed with the best of intentions, so as to reduce the electricity bill of consumers, but at the cost of proper service. The reduced tariff also threatens to derail the Shanghai Electric Power Company’s alleged takeover of K-electric. Shanghai Electric has unveiled a plan of investing US$9 billion in K-electric over the next ten years. This investment can prove to be a game changer for load-shedding in Karachi; where the demand for electricity is projected to double in the next ten years. Instead of relying on an artificial manipulation of numbers, NEPRA should focus on energy production and distribution to lower tariffs. Pakistan possesses massive potential for hydro-electric energy, but our reliance on establishing power plants run on expensive and polluting fossil fuels is a highly cost-inefficient endeavour. Pakistan’s faulty transmission lines also result in losses in electricity distribution which lead to higher tariffs. Perhaps NEPRA ought to reconsider the untenable low tariff it has imposed on K-electric and to instead work on the issues plaguing electricity production in Pakistan. That would be a true and lasting service to the consumers of power in Pakistan, especially the common people suffering from unjustifiable electricity blackouts every day. * Published in Daily Times, July 18th, 2017.