ISLAMABAD: The government had the only viable option to spread electricity bills of July in the next four to five months to provide immediate relief to the people, whereas privatisation of DISCOs could be a long-term solution of the power sector.
This was the gist of the discussion by former prime minister Shahid Khaqan Abbasi, former finance minister Miftah Ismail and Mustafa Nawaz Khokhar at a Twitter space, Facebook, and YouTube live event, as to why electricity bills are so high and what can be done to reduce them in short- and long-run.
Abbasi said political instability is the rootcause of every problem in the country including economic instability and this could only be dealt by holding free and fair elections.
He added that the privatisation of DISCOs is the solution to the problems in the power sector.
In response to a question as to why they have been unable to tax the agriculture sector, traders, and construction sector, he said the government can tax agriculture income and not the agriculture sector and acknowledged that traders could not be brought under taxation because of political pressure.
Abbasi further stated that an increase in direct taxes and exports is the solution to the economic problems of the country and if exports are increased by $20 billion, Pakistan’s majority of problems would be resolved. He added that everything depends on politics, which was turned into enmity in recent years.
Abbasi said that one of the major causes for high electricity bills was the depreciation of the rupee against the dollar as the country heavily depends on imported fuel for power generation.
As a result, Abbasi added, unfortunately, electricity bills are out of the reach of 60 to 70 percent of the consumers. He added that successive governments’ inability to bring about reforms in the power sector as well as the depreciation of the dollar from Rs105 in 2017-18 to over Rs302 now are major factors for unaffordable electricity in the country.
The former premier said that there was no choice for the country other than the imported fuel and 12,000MW was installed to replace the old inefficient plants.
The expectation was that the economy which was growing at six percent would continue at the same level or at a higher rate in the coming years and the installed capacity would be utilised.
However, he said that subsequently due to a decline in industrial growth and non-utilisation of installed power, the capacity payment issue emerged. Another reason for the capacity payment was the depreciation of the rupee against the dollar, he added.
Replying to questions about handing over DISCOs to the provinces, he said that there are positive and negative aspects of handing over DISCOs to the provinces.
The positive aspect is of possibility that losses of DISCOs might be reduced, whereas, the negative aspect is that the governance in the provinces is very poor compared to the federal government, which would have a negative impact on the consumers. He said that the circular debt is another issue and it has been a negative ramification on public debt and budget.
Abbasi said that Rs300 to Rs500 billion is annual circular debt because of theft and non-payment of bills, whereas, one-third of the circular debt is of nuclear power.
Abbasi defended the controversial agreements made with the IPPs in the past and stated that this is a misperception that the electricity bill has been increased because of IPPs, whereas the fact is massive depreciation of the rupee is the real reason.
He deplored that the smart meters could have also been the solution but there has been a pushback from the DISCOs. Abbasi added that the NEPRA reference tariff of 3.21 cents, which was very low, discouraged solar energy in the country and no bid was submitted by the investors.
The former finance minister, Miftah Ismail, defended the dollar-linked rate of return to the IPPs and stated in 1994 there were a lot of foreign investors who made an investment in dollars and sought return in dollars as well. He added that this policy of dollar rate of return was subsequent investors was also allowed because of their dollar investment.
Miftah said that billions of rupee losses have been incurring in the power sector for decades but none of the government had taken any reforms in the sector. He said that there is 32,000 MW demand in summer which declines to 14,000 to 15,000MW in winters and for the remaining unutilised electricity, the consumers have to pay the capacity payment. Ismail said that in June, electricity was generated by running inefficient power plants.
The ex-finance minister said that reforms even if undertaken today would fix the sector in the next four to five years. He was of the view that a reduction in income tax rate would increase the tax collection. Ismail said poor governance for the last 20 years has propelled the country into the prevailing crisis and sadly, the country has neither been able to solve circular debt, nor terrorism and population issues.
Mustafa Nawaz Khokhar said how one can pay Rs20,000 to Rs25,000 electricity bill whose income is Rs40,000 and if he pays the bill how would he feed his family. He said some officials of the IESCO, whose recovery is the highest have told him that the alarming situation is that their recovery has fallen significantly.
This, he said reflects that the people are unable to pay bills. He further stated that an increase in electricity bills for July would push additional people below the poverty line.
He said that the actual issue is the depreciation of the rupee and this was happening only because of political instability which started with “Dawn leaks” and now with the departure of Imran Khan from office. As a result of political instability, no one is ready to invest and the only permanent solution is to end prevailing political instability by holding free and fair elections.
Khokhar said that the electricity bills have become a human rights issue in the country. He said that no one knows how long this caretaker government would continue. He said that the country needed at least 10 years of political stability to fix the problems.
He also dwelled on the issue of failure with regard to the deletion programme of vehicles and increase in the prices of sugar and the country was being ruled on the basis of might is right, regardless of rule and law. He also regretted that political parties were lacking in the seriousness needed to deal with the deep crisis.
They added that Pakistan’s system is captured in a way that people in power protect each other and as a result, various sectors were not brought into the tax net.
Copyright Business Recorder, 2023