EDITORIAL: The government has pledged to raise gas prices by another 41 percent to meet a standard International Monetary Fund (IMF) condition to achieve full cost recovery, reiterated in the ongoing Stand By Arrangement (SBA) - an objective that all administrations, including the incumbent caretaker setup, have interpreted as passing on the buck to the consumers rather than implementing structural reforms aimed at ending sectoral inefficiencies that would mitigate the need to raise tariffs.
In the first SBA review report uploaded on the Fund website on 20 January 2024 the government committed to automatic implementation of semi-annual gas tariff adjustments, including Oil and Gas Regulatory Authority’s (Ogra’s) December 2023 determination, within the required 40-day window and full phasing-out of captive power usage.
Data released by the Pakistan Bureau of Statistics (PBS) with respect to the rise in gas charges and their impact on the hapless consumers is more accurately reflected in the Sensitive Price Index year-on-year (calculated at 480 percent rise in the week ending 16 November 2023 to 1108.59 percent for the week ending 18 January 2024) rather than the Consumer Price Index, which lumps housing, water, electricity, gas and fuel together with a combined weightage of 18.49 percent, which showed a rise of only 3.58 percent in December 2023 against the same month of 2022.
In addition, the cabinet rejected the Power Division’s proposal to block passports, identity cards and foreign travel of defaulters and the establishment of a Performance Management Unit (PMU) that was to report directly to officers from PAS, FIA and intelligence agencies headed by a serving BS-20 officer from the Pakistan army.
The stated reason: rather than disturbing the functional power sector bureaucracy or the Pakistan Army officers currently engaged in anti-terror activities within and outside the country, the Power Division needs to build its own in-house capacity to monitor affairs of distribution companies (Discos).
The Power Division’s rather extreme proposals were no doubt premised on the powerful delinquents- be they institutional or different tiers of government (federal, provincial or local) or the politically well placed private sector - for not only defaulting on payment of their arrears but in some reported instances, assaulting those who came to disconnect the power supply after repeated requests to clear their bills did not lead to any positive results.
In this context, it is also relevant to note that when the PTI (Pakistan Tehrik-e-Insaf) administration engaged in negotiations with independent power producers (IPPs) with the objective of providing some relief to the hapless consumers subjected to ever-rising tariffs to meet contractual obligations of take or pay (capacity charges) and allow 100 percent repatriation of profits in dollars our premier intelligence agency officials were present and, according to well placed sources, played a critical role in reaching agreements with all but those IPPs set up under the umbrella of the China Pakistan Economic Corridor (CPEC). Be that as it may, one can fully support the Cabinet decision to strengthen the existing in-house capacity of the Discos to reduce their receivables rather than relying on civilian and military personnel to do their job.
It is relevant to note that the multilaterals insist Pakistan achieves full cost recovery while cautioning against passing the onus onto the poor and vulnerable, which may appease their conscience but which on the ground has led many a household to be degraded - from a low middle income earner to a poor one – yet our administrations, including the incumbent one, focus on privatisation as the solution to all that ails the power sector.
One would hope a more in-depth analysis by sector experts who have been citing the need to implement reforms with respect to three major impediments: (i) the flawed policy of uniform tariff across the country that required a budgeted subsidy for the current year of 205 billion rupees; (ii) a heavy element of cross subsidy between different categories of consumers within the tariff prescribed by the government; and (iii) all senior appointments in Discos by post-2008 civilian administrations have not been successful in terms of turning the Discos around and in this context one would suggest the setting up of a committee of men of integrity with a track record of not succumbing to any pressure.
Indeed such a committee was established during the third tenure of Nawaz Sharif as the prime minister (2013-17), as per a Supreme Court decision, but all three resigned when the government of the day did not heed their advice.
Copyright Business Recorder, 2024
Comments
Comments are closed.