Frozen prices & frozen minds

The energy minister’s speech in the National Assembly the other day irked quite a few on the opposition benches. He was not entirely wrong in blaming the predecessors for a large part of the mess that gets messier by the day. But 18 months is not exactly too small a timeframe. The government should stop playing the blame game already – and instead, show something to its credit.

What is almost clear is that the Prime Minister is not chuffed about where the prices are going. Unconfirmed reports have it that proposals of freezing the energy tariffs are under consideration. Pakistan has been on that road before. More than once. And on every occasion, it has led to where things are today. Do not expect to miraculously land on moon by taking a tried, tested, and failed route of using air balloons.

The script is eerily similar to the last two IMF programs. Power prices were jacked up right after or before the program – with a well laid-out plan to rationalize them over three years, to stop the flow of arrears. Guess what? The arrears are pretty much here. And rising. The gradual price rationalization never came. It was just the upfront price increase to get the ball rolling – and that was that.

So, if the energy prices are to be frozen, that pretty much wraps up about the only thing going on in the whole ‘energy sector reform’ sphere. Unless of course, the discos decide to be fully efficient on their own and stop bleeding, and the transmission network stops being what it is, and the lopsided IPP contracts with the LNG power plants get annulled with a divine suo motu, and the government has free cash to dole out hundreds of billions of rupees as incremental power subsidy.

This is not suggesting that the IMF route to go about power sector is the best one. But it sure is one of the many that may still be taken. Granted, that the IMF’s focus has mostly been on the revenue affairs, but just because past governments’ performance in achieving reforms in technical areas has been abysmal, should not be a license to give up on the revenue side. There are programs ongoing with the aid of the ADB, aimed at reforming the sector. But Pakistan had also completed a billion-dollar program two years ago, which said something along the lines of ‘sustainable power sector structural’ reforms.

The IMF would not care less about Pakistan’s energy reforms or whether it enters another bigger circular debt hole. It has not in the past. It won’t now. It has happily granted waivers on energy related measures. It will gladly do so again. Pakistan can always print more rupees to keep the ship afloat, and therefore continue to make a good contender to be a perpetual IMF client. Pakistan will have to clean the energy mess on its own. And freezing energy prices is not the smartest start. Yes, an increase may be delayed for a few months, given the scenario. Meanwhile, working on the real reforms could also come in handy, if Islamabad is looking for a starting point.