That Pakistan’s power distribution system has been rotten, is a well established fact. That the efforts to clean it up are mostly limited to lip service, is a less discussed one. The country’s transmission and distribution (T&D) losses stood at 18.59 percent in FY13. The plan was to bring it down by one percentage point every year. The country’s T&D losses today stand at 17.95 percent. The managers have managed to ‘improve’ it by one-tenth of a percentage point every year instead.
Worse still, the T&D losses are part of the final consumer tariff. The distribution companies were allowed 15.27 percent of units to go missing, yet be made part of the tariffs in FY15. They are now allowed 15.41 percent. Of the final tariff of Rs10.41 per unit, Rs1.84/unit is added on account of kosher T&D losses. The difference falls on the poor discos. One might as well argue for the difference to be charged to the consumer as well. Let them pay for someone’s inefficiency completely.
There will always be losses in a power distribution sector. And looking at the world average of 8.2 percent T&D losses – one would say Pakistan is doing only twice as worse. But others have improved in the meanwhile, and this shows something can surely be done instead of simply incentivising inefficiency by graciously allowing it to be part of consumer tariffs. KE’s example should not go unnoticed - from 37.4 percent of T&D losses in FY10 to 25 percent in FY17. It surely must be doing something right. Privatisation maybe?
The combined impact of T&D losses embedded in the tariffs comes at Rs191 billion. The subsidy bill for the current fiscal year would be close to Rs250 billion (read: ‘Power tariffs: Who will foot the bill’ published 10 Jan, 2019). Worse still, the lion’s share of T&D losses is reported in the domestic sector, which also happens to be the most subsidized. The honest consumers in industrial and commercial categories end up paying the tax for honesty for a consumer category that ends up being the most incentivised and most protected.
A lot was blamed at the absence of power theft laws. That is in place now – but there is zero progress. The problem surely lies somewhere else. It is high time, Nepra stops generously allowing such high T&D limits to the underperforming discos. Not only does this create incentives for underperforming, but also penalises the honest consumers.
Secondly, it should be clear by now that the existing governance structure of discos won’t cut the deal. It has not improved in ages – it will not in the future. However inconvenient it may sound, privatization is the way out. K-Electric is not an example from Mars or from centuries ago. This is assuming that Islamabad even considers that a problem.
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