Power tariff raise

It looks as if revival of the IMF loan programme – stalled since the Covid-19 outbreak – is afoot. It looks so because the federal government has increased the prices of petroleum products twice during the ongoing month, following up with a raise in the power tariff, by Rs1.95 per unit, on Thursday. The Imran Khan-led government, formed in the wake of the July 2018 elections, had similarly paved the way to the $6 billion loan deal inked with the global lender in June 2019. Media reports say that IMF wants the government to increase utilities’ charges and take steps to reduce circular debt and power losses in order to have the bailout programme back on track.

The Rs1.95 raise in power tariff constitutes a 13% increase in the average per unit cost of electricity supplied – already highest by far in the region. While costlier power will ensure an addition of a few billion rupees to the government revenues, higher tariff for the industry will come back to bother the government itself. Needless to mention that the raise in power tariff will add to the cost of industrial production – meaning a rise in inflation. It also threatens to turn our exports uncompetitive for buyers in the US and Europe who have only recently reverted to us because of Covid-19 lockdowns in much of our neighbouhood. The industry has expressed concerned over what they call an ‘untimely’ government move that jeopardises the renewed momentum in the economic activity in the country.

When in the opposition, Prime Minister Imran Khan had promised the much-needed structural reforms in the power sector – and other sectors of the economy – to curtail power tariff, thereby allowing the domestic consumers to breathe easy and ensuring industrial consumers an ease of doing business. However, the incumbent government’s performance is even more disappointing than the previous ones when it comes to tackling power theft and improving recovery of bills. The circular debt – which has galloped to a worrying Rs2.3 trillion from Rs1.2 trillion around the time of Imran Khan’s swearing in as PM – looks like an uncontrollable monster which is enough to speak of the performance of the incumbents.