Misaligned incentives

Federal government is threatening to deduct Sindh government’s unpaid electricity bills from its share of revenues.


Editorial December 19, 2013
Once the power companies are entirely Sindh’s responsibility, the federal government would be well within its rights to demand that Sindh fix its billing problem. PHOTO: FILE

On the surface it seems like a simple dispute. The federal government wants Sindh to pay its electricity bills and is threatening to deduct the provincial government’s unpaid bills from its share of federal revenues if it fails to comply. But the reality is more complicated. The Sindh government has some valid points about those unpaid bills, arguing that the federally-owned utility companies in Sindh have a tendency to overbill the provincial government as a means of trying to reduce the figures for their overall line losses. There is no easy or immediate solution to this problem. But a good way to start might be to try to align incentives of the federal and provincial governments. The federal government is right in wanting outstanding bills paid. The Sindh government is right in wanting to ensure that those who actually owe those bills be forced to pay them. While the power companies are, at least, partially to blame for trying to divert attention from their problems, surely, it is the Sindh government’s responsibility to crack down on power theft within its jurisdiction. But so long as the power companies are owned by Islamabad and law enforcement the responsibility of Sindh, this dispute is likely to drag on.

One solution that has been proposed by policy experts is to devolve jurisdiction over the power sector to the provinces. Oil and natural gas are already provincial subjects. It makes no sense to have one segment of the energy chain subject to the federal government and the other to provincial governments. Once the power companies are entirely Sindh’s responsibility, the federal government would be well within its rights to demand that Sindh fix its billing problem, either by paying its own dues or by making those who owe the bills to pay them. Provincial fiscal autonomy is one of the most important steps taken to strengthen the federation in the last decade. It is incumbent on Islamabad and the provinces to ensure that their petty squabbles do not damage the cause of further devolution of power.

Published in The Express Tribune, December 20th, 2013.

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