Tackling the energy crisis

It has been obvious for, at least, five years now that the subsidies given by the government on electricity have grown beyond any reasonable limits. But, perhaps, the scale of the waste being perpetuated has not been fully understood. The report that over half the subsidies being paid out are essentially covering the cost of theft and people not paying their bills should be an outrage to law-abiding citizens who pay their taxes and bills on time. Sadly, it appears that there are too few of such citizens in Pakistan.

While it is apparent that electricity tariffs must be increased from their current levels to cover the full cost of generation, transmission and distribution, no solution to the energy problem can be achieved without addressing the problem of theft. To this end, an approach that relies on discriminating between areas where most customers pay their bills and those areas where most do not would be a rational approach to incentivise good behaviour on the part of electricity consumers.

This model has already been successfully applied by the Karachi Electric Supply Company with remarkable results that have reduced power cuts to nearly zero in about half the area of the country’s financial capital. An application of this model, particularly in regions like Punjab, which have very low and concentrated levels of theft, would be a boon to electricity supply in the province that has been among the worst hit by the energy crisis.

Why this has not already happened is a testament to the government’s adhoc approach to policymaking in the energy sector. Originally, the government created 10 separate electricity distribution companies as a means of ensuring the ability to crack down on theft and inefficiency. It was a good idea, but the transition was never fully completed, with all of these companies remaining under a single government bureaucracy, largely because the civil servants in charge in Islamabad did not want to give up their powers. For the lights in Pakistan to come back on, it is necessary that the government serve its people, not the bureaucrats.

Published in The Express Tribune, June 5^th, 2013.

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