Pay the price for power (inefficiencies)

Such is the news flow in Pakistan these days that a news item as significant as a 28 percent hike in power tariff, fails to make the headlines. Thanks to the floods and the shame that the Pakistan cricket team has brought to the nation -the plan for a massive electricity tariff hike got less attention than what it deserved.
Pepco has reportedly drafted a plan and also has it cleared from all the relevant bodies, which include the World Bank and The Asian Development Bank. The government sees the electricity cost and purchase differential to go as high as Rs226 billion in FY11 according to the report.
No real surprise that the government wants to bridge the cost differential through raising the tariffs - as it was quite clearly mentioned in its Letter of Intent (LoI) to the IMF back in May 2010. It was after the budget FY11, when it was feared that the electricity tariffs would be raised by at least 25 percent, as the IMF programme does not allow Pakistan to continue with the power sector subsidies on a large scale.
The proposed 28 percent tariff hike, if implemented, would validate the point that the inclusion of inter-disco tariff differential subsidy in the FY11 budget was never meant to be. The suspicion gets more credence when one looks at the governments LoI to the IMF in May 2010, which explicitly stated that there would be no tariff differential subsidies come FY11.
The major worry is that the root of the evil has not been targeted yet. The tariff hike is meant to make up for the inefficiency in the national power system, from generation to billing collection. Bear in mind, the consumers have already faced a 60 percent power tariff hike in the last two years, but nothing has been done to plug the loopholes in the system.
The tariff hikes would only help the government meet the IMF requirements, but it provides no end to the problems, rather creates one in the longer run. The recent decision to wind up Pepco seems a bold one, but experts fear it is unrealistic and will create more problems in the immediate term.
Pakistan is understandably on the back foot, when it comes to dealing with the IMF - but it is about time that the government stands tall and looks to rectify the fallacies in the power system. Winding up Pepco and board corporatization may well have good intentions, but for the system inefficiencies to fade, it needs more political will than face-changing.
If and when, Pepco does get sidelined, the onus will be on the ministry to deal with all the issues. The track record of the ministry in the RPPs episode does not bring sweet memories. Things might work out if and only if, Raja Pervez and company have the will to kill the evil.