As a result of the alleged corruption and ineptitude of the power bureaucracy in the country, the cost of dealing with these issues is increasing. In accordance with the agreement reached with the International Monetary Fund (IMF), the government has not been successful in keeping the circular debt of the electrical sector below Rs2.31 trillion, as shown by the recently disclosed official figures.
During the first seven months of the current fiscal year, the total amount of debt stock has grown by Rs325 billion, culminating in a total of Rs2.64 trillion. The authorities have not yet started to address the underlying problems that are causing the power sector to be hindered, as seen by the continual growth in the circular debt, which happens despite several rounds of increases in the price of electricity and changes to fuel costs. This is a reflection of the fact that the circular debt continues to expand.
Inadequate recoveries, widespread theft, significant system losses, generating costs, and other obstacles of a similar kind are among these kinds of problems.
Despite the fact that the secretary of the electricity ministry has said that they have been running a “successful” campaign against power theft and defaulters since September of the previous year, this scenario contradicts their remarks.
a result of being pushed to do so, the government has agreed to make a pledge to the International Monetary Fund (IMF) to increase the base price by Rs5-7 per unit commencing in July. In order to prevent the circular debt from increasing in the next fiscal year, this action is being taken.
Not only do residential customers have to pay higher rates, but they are also the most major victims of the inefficiencies that are present within the electricity system. This is especially true for families with middle-incomes families. This is due to the fact that they are required to pay in the event of theft, system losses, subsidies for prominent industry lobbyists, and other charges of a similar kind on each and every unit that they use inside the power sector.
According to a report that was published in the media, the price of power for users in the domestic market is Rs62 per unit. Due to the multiple sorts of price rises and levies that are integrated into the power rates in addition to the base tariff, this price is already twice as much as the base tariff that is already charged. As a direct consequence of this, the majority of people are unable to pay the cost of electricity.
Additionally, the government is proposing that the general people not only pay a higher base tariff starting in July, but also bear the costs that would result from significant reductions in the tariffs that are imposed on industries.
This request is being made at the current time. This cannot continue going on forever. Protests over the cost of energy have been taking place in Azad Jammu and Kashmir in recent times, and they have been found to be violent. Any further increase in the price of energy has the potential to create unrest in a number of different places throughout the country.
This is due to the fact that the income of normal people is no longer sufficient to satisfy their necessities as a consequence of higher inflation and erosion in real wages—both of which have contributed to the situation. In addition, it is assumed that the increase in the cost of energy will result in an increase in the amount of electricity that is stolen.
In the past, as well as via the accumulation of cyclical debt, it has been shown that price rises contribute nothing to the economy. In order to solve our power issues, we need to make meaningful adjustments to address the reasons that are contributing to the rise in the cost of energy as well as the amount of debt that we owe.
Copyright Business Recorder, 2024
The writer is the Director of ORIC and an Assistant Professor at the Department of International Relations, MY University, Islamabad
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