Real reasons of power tariff hike

Electricity prices predicated on fuel costs and acquisition of foreign exchange for its purchase

It is noticed that efforts are being made for political point-scoring on the issue of increase in electricity prices. It is true that the common man has been affected by the inflated electricity tariff but one of the main reasons for the prevailing situation is that people do not know the background of the increase.

Few people are aware of the fact that the price of electricity is usually determined based on two factors: the first is the price of fuel and the second is the supply and acquisition of foreign exchange for its purchase.

At present, Pakistan is dependent on the import of furnace oil, diesel, coal and other fuels in order to generate electricity. Hence, fluctuations in the exchange rate of the dollar cannot be ignored. It should also be noted that the Independent Power Producers (IPPs) have to be paid in dollars.

In relation to the dollar rate, a condition was imposed by the International Monetary Fund (IMF) that the government of Pakistan would not artificially control the exchange rate of the dollar rather the rate would be determined by the open market.

The Imran Khan-led government granted autonomy to the State Bank of Pakistan (SBP) under the strict IMF terms. As a result, if an attempt is made to control the dollar, the country's foreign exchange reserves come under pressure that will increase the severity of the overall economic problems.

It is also important to point out that electricity theft (line losses) is a social problem that needs to be rectified. However, concrete measures in this regard are still awaited. If action was taken without any delay against the culprits, there would have been no reason the power theft would have continued.

As far as the electricity consumption is concerned, few people know the fact that 75% of electricity is consumed by domestic consumers. Business activities are also run on the use of electricity for industry, trade and other activities.

Increase in the domestic consumption results in high electricity bills, which creates unease among the public. In such a situation, a suitable strategy would be to adopt the habit of efficient electricity use. In this regard, we need to benefit from the laws and procedures in vogue in other countries.

Peoples, institutions and businesses in the developed world use more and more sunlight, while here in our country, it is preferred to keep markets and business centres open till late night. In view of our current energy situation, change and correction in our path is the need of the hour.

Some experts believe that electricity distribution companies (Discos) should be privatised. In this regard they cite the example of the PTCL – the erstwhile TIP. In this background, it can be said that the privatisation in the power sector is also inevitable.

If this decision is taken, it will create an environment of competition in the market, which will pave the way for self-sufficiency much to the benefit of the electricity consumers in many aspects.