ISLAMABAD: Electricity consumers of Karachi, Hyderabad and Peshawar cities will have to pay much more than their counterparts in Islamabad and Lahore, as the government is going to dissolve the Pakistan Electric Power Company (Pepco) and end one tariff regime from November, says a top official.
Deputy Chairman Planning Commission Dr Nadeem ul Haq said that the government has committed with the IMF to dissolve Pepco before October 31, which will also herald an end to universal electricity tariff regime nationwide. He said the disbanding will be part of a larger plan of resolving problems plaguing the energy sector.
Dr Haq said that under the proposed regime the government would not pick up the line losses and cost of electricity of power distribution companies. The customers of efficient distribution companies would be the ultimate beneficiaries, he added.
Pepco and its distribution companies have been eating up the already limited public resources due to their inefficiency. The donors are pushing the government to de-regulate all of them and avoid subsidising electricity. The line losses due to power theft and obsolete infrastructure have become a chronic problem.
Independent analysts say that instead of improving their efficiency the authorities are implementing the faulty policy of recovering cost by increasing tariff.
Out of nine distribution companies, five – Karachi, Hyderabad, Peshawar, Quetta and Multan – are the worst performers whose line losses run into 30 to 40 per cent. One per cent line loss means Rs6.5 billion hit to the public purse.
Dr Haq said that certain issues were still to be resolved before scrapping Pepco. The company has been entrusted the task of managing the transition of Wapda from a bureaucratic structure to a corporate, commercially viable and productive entity. According to Pepco’s own statement, it is a mammoth task and progress is very slow.
Dr Haq, who was also part of the negotiating team with the IMF, said that talks with the Fund were successful. He, however, said that without implementing the reformed General Sales Tax the IMF would not release the next $1.7 billion tranche.
Pakistan has committed with the IMF that it would withdraw tax exemptions on goods and levy 15 per cent tax on services too from October 1. Nonetheless, the progress towards the goal was very slow.
Finance Minister Hafeez Shaikh said that “it was time for the elite of Pakistan to come forward, start paying taxes and stop resisting reforms”.
The vested interests within and outside the government were resisting the reformed GST implementation.
Dr Haq said that if Pakistan remained successful in implementing the reformed GST then the IMF team would come to Pakistan to finalise the fifth review of the economy that would pave the way for the release of the next tranche.
He said the government has to persuade the IMF that without taking into account the effects of the floods it was in a comfortable position to achieve the budget deficit target of four per cent of Gross Domestic Product or Rs685 billion.
He said the floods’ real implications would only be known once the Damage Need Assessment report of the World Bank and the Asian Development Bank is out. It is due on October 15.
Published in The Express Tribune, September 17th, 2010.
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