Power tariff, privatisation and the law

Published: October 10, 2013


In its zeal to stick to the IMF deadline, the PML-N government bypassed the provisions of the National Electric Power Regulatory Authority (NEPRA) Act, passed during its earlier tenure in 1997. By making the federal government withdraw the notification regarding the hike in power tariffs, the Supreme Court has finally put an end to the practice of routinely violating this law. Surely, this is not one of the “interventions by the Supreme Court in economic and administrative issues” described by the IMF Staff Report as a “source of uncertainty”. Actually, the government has given a commitment to the IMF to “augment the independence, accountability, and administrative capacity” of NEPRA. The plea that NEPRA notified a higher tariff, without taking into account the subsidy, was a lame excuse. A most important aspect of tariff determination by NEPRA is that it is bound to hold public hearings to protect consumer interest. Its chairman’s commitment to the Court to complete the process, in up to three weeks, suggests the process may be hurried through yet again.

The problem lies with a culture of disrespect for due process. In this case the issue was the NEPRA Act. Of far more significance is the violation of the Constitution. After the Eighteenth Amendment, all regulatory bodies, including NEPRA, have been placed in Part II of the Federal Legislative List, which is the domain of the Council of Common Interests (CCI). However, the cabinet division continues to be the controlling division of NEPRA, without any involvement of the provinces through the CCI. All that has changed is that NEPRA sends its annual report to the CCI, besides the federal government. Soon after the Eighteenth Amendment was passed, a subcommittee was set up under the minister of water and power to report on the working and functioning of NEPRA within the Constitution. The details of the report have not been made public.

It must be remembered that NEPRA was set up as part of the strategic plan to restructure and privatise the power sector. As a statutory body, its task is to safeguard the interests of all stakeholders, especially the public, when a public monopoly is handed over to the private sector. Now the Eighteenth Amendment has also made electricity an item of Part II of the Federal Legislative List. There is no evidence of the involvement of the CCI in the recent deliberations on privatisation of the power sector entities. In 2011, the CCI had cleared 11 entities for privatisation. At the same time, the CCI had taken the decisions about the direct involvement of the provinces in the Cabinet Committee on Privatisation (CCoP) and the Privatisation Board. The CCoP met on October 3, 2013 in clear violation of the CCI decision that the chief ministers concerned shall be members of the CCoP. It seems that the chief ministers concerned were not even invited. At the meeting, the Privatisation Commission provided a list of the entities to be privatised. This list should have been approved by the Privatisation Board with the concerned provincial chief secretaries in attendance, again a requirement of aforementioned decision of the CCI.

The present phase of privatisation entails large utilities enjoying monopoly power. Without a well-respected and competent regulatory framework and the resolution of all issues to the satisfaction of the stakeholders — in particular the provinces, consumers and workers — in accordance with law, the privatisation process will not be perceived as transparent. Nothing can be a greater source of uncertainty to the investor.

Published in The Express Tribune, October 11th, 2013.

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