Fixing prices should not be the government’s job. The government’s decision in principle to let the energy pricing be done by the relevant regulators is indeed a welcome move (read: Doing away with pricing, published Apr 4, 2019). But is the timing appropriate for such a move and are the prerequisites in place for taking an action of potentially massive impact?
Doing way with the petroleum pricing is rather straightforward, and the government can simply work out its tax revenue requirements on account of GST and PL – fix it in absolute terms and let the market be at play, allowing Ogra to pass on the impact in either case of high or low input prices and currency to the end consumer.
The real challenge would be dealing with energy prices – as it is a much more complex issue than petroleum prices, and can potentially have a telling impact, especially politically. While the government should not be in the business of fixing prices, it should not be doing business either. That is where the equation becomes complicated.
So when the government talks about deregulating the energy prices, will it also opt out of the uniform national power tariff mechanism? Recall that the regulator NEPRA determines tariffs for each and every disco, keeping in view the revenues, fuel costs, and transmission and distribution losses.
And the power tariffs determined by Nepra vary a great deal among discos.
Nepra determined tariff for Pesco consumer in the highly used 100 unit domestic slab, for instance, is 55 percent dearer than that determined for Gepco consumers.
The national uniform tariff for Gepco consumers in this slab is 20 percent more than its own tariff – while that for Qesco is 22 percent lower. Needless to say, these two discos are at two extreme ends of efficiencies, both in terms of recovery and T&D losses – where Gepco’s T&D loses are at 10 percent, while that of Qesco are 22 percent.
It is highly unlikely that the government will take a decision of such sensitive political nature this soon at the office. The obvious question will arise that why should the honest paying consumer of a poor performing disco be penalized for the inefficiency that primarily stems from it being state owned.
The de-linking of prices from the government is a vital cog of the machine, but that should come later in the reform process.
And the reform process, sadly, does not seem to be going anywhere. The government just simply cannot absolve itself of the pricing burden without letting go of the control of discos.
The discos must be privatized, and if not, then at least be transformed a great deal. The consumers should be given the choice to purchase power from the disco of their choice. That is only when and how the government can justify such a step, with a genuine effort to run the electricity market on a commercial competitive deregulated scale. Without it, it would be shooting itself in the foot.
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