Agreement with IPPs

In the past, some would argue that this is because the major defaulters are in positions of power

The government’s agreement with Independent Power Producers (IPP) is most welcome news in these difficult times. The deal will help reduce costs to both the government and consumers, while apparently reducing the amount of scrutiny that power producers face at the hands of various oversight bodies. The change in equity return currency from dollar to rupee will also help provide some much-needed stability. It is also heartening that the government is trying to shift away from imported fuels to renewables, which are cleaner and much more cost-effective.

Unfortunately, the government appears to be overselling the overall impact of the deal. Many large power producers were not covered by the agreement, meaning that the true gains will be limited until there is broader acceptance of the new conditions. The government could also not offer a timeline of when citizens will actually see any of the benefits.

Special Assistant to the Prime Minister on Power Shahzad Qasim may have acknowledged one of the other issues during a recent press conference where he noted the reduction of the rate of late payment surcharge to be paid by the government. The fact that reducing it counts as an achievement is a reminder that the circular debt issue is not going anywhere soon. Even if reduced rates are accepted by all producers, there is no visible solution, even on the horizon, for paying down the existing mountain of debt. Then there is the issue of line losses and defaulting consumers, which no government has ever been willing to actively address.

In the past, and some would say the present, some would argue that this is because the major defaulters are in positions of power. After all, we rarely hear of the mansions of billionaire defaulters getting their lines cut, even though urban slum dwellers regularly see such fates over a few missed payments of minuscule amounts. Then there are line losses, the continuing existence of which remains paradoxical. The government could easily address them with proper policing and monetary and punitive penalties, especially when successful businesses are the culprits instead of blaming their ‘powerful lobbies’. All it needs is the will to do so.

Published in The Express Tribune, August 19^th, 2020.

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