Govt starts raising power tariff

Author: Daily Times

Now that the government has started the process of raising electricity tariffs, to generate more than Rs1 trillion in additional revenue for ex-Wapda distribution companies, is there really reason to celebrate because international lending agencies’ requirements are being met and the bailout program is on track? It turns out that according to the program shared with the International Monetary Fund (IMF) as part of the Circular Debt Management Plan, an increase of Rs4-5 per unit is now going to be passed on to consumers till December 2022.

It is difficult to see how such an arrangement can do anything to turn the economy around. It will put yet more burden on the people at a time when both growth and employment are very low and inflation is big enough a problem for the prime minister to show his finance minister the door only recently. Yet more expensive electricity will raise living and input costs across the board, further eating into people’s budgets and making yet another round of cost-push inflation inevitable.

The decision to rush into higher electricity tariffs also means that the more important processes of Federal Board of Revenue (FBR) reforms and effective mitigation of the circular debt have once again been set aside for a quicker fix that will show the right numbers on paper and make the Fund happy enough to keep the money flowing. But wasn’t it Federal Minister Omar Ayub, back when he held the energy ministry, who claimed that circular debt growth would be brought to zero by December 2020? And by the turn of the year it stood at about two-and-a-half trillion rupees. Why didn’t that prompt any inquiry at the highest level of government? PM Imran Khan has often said that energy is the worst of all problems that his government has inherited. Why, then, are we still at a point where the circular debt is at historic highs, tariffs have to be raised all the time, and reforms are nowhere in sight?

In fact, Omar Ayub and Nadeem Babar claimed that the circular debt would freeze at around Rs1.6 trillion about now and got desk thumping appreciation from the cabinet. Yet now it is another trillion rupees above that figure. Why haven’t they been held accountable? Simply giving Omar another ministry is not accountability, at least in Imran Khan’s government. Heads should have rolled. Constantly raising electricity tariffs to generate revenue, while the real state mechanism to generate that revenue remains paralysed, cannot be the final answer to Pakistan’s debt problem. It would have been far better to bite the bullet and initiate long-term reforms of the revenue generation machinery instead of agreeing to stiff conditions like the tariff hike. Now, with the third wave of Covid-19 already destroying lives and livelihoods alike, people have one more completely unnecessary problem to worry about. *

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