TARIFFS RISE ON CIRCULAR DEBTS

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)

May 24 - 30, 20
10

While electricity consumers are enduring 8 to 12 hours of electricity load shedding in the country, federal government has said to give a push to electricity tariffs to 6 per cent till the next budget, which will do nothing but aggravate the woes of electricity-deprived consumers. The government has said to carry on with this inflationary step to generate revenues to make up for losses sustained by power companies due to inter-corporate debts.

Adviser to prime minister for finance, a portfolio equivalent to minister, Dr Hafiz Sheikh justifying the rise in electricity tariffs said the revenue and expenditures gap had reached to Rs1000 billion when total revenue stands at 1500 billion rupees per annum and expenditures Rs2500 billion. And, the government has no option but to tap revenue sources.

Independent economists criticise the government's actions for its extreme partiality saying all government's unpopular decisions are originated from IMF's (International Monetary Fund) diktat that overlooks the fallouts on the society at large. IMF agreed to prop up the balance of payments of Pakistan on the conditions that were inflationary in formations. Besides withdrawal of subsidies on energy products, it demanded the government of filling the gap in revenue channels; upon which the government resorted to easy way of refilling leakages of public taxation and earning money through increasing utility charges. Public taxation could have been a welcome decision had it been started from upstream and if the government had removed the anomalies and irregularities from its different departments first that render the national exchequer colossal losses in billions.

Value added tax that will bring in to tax network small traders who evade issuance of sales tax receipts to customers is an impending income eroding agent to be weighed heavily on family incomes of common households. The countries which are citied as support to VAT have economic progress far different from Pakistan.

According to an industrialist, by only correcting flaws in tax system government can generate 400 to 600 billion rupees per annum. Shrugging off the advice the government has in a way unveiled its weakness in straightening the structural faults which lay open in every second government departments.

Same laxity in generating revenue from proper sources is also seen in the power sector. Drawing justification from increasing furnace oil prices, the government in its short span of ruling allowed several times rise in electricity tariffs. It is an irony that during this period absolute power consumption stayed on ebb owing to inexorable load shedding in peak seasons. Round the clock power supply has been a rarity since years unmemorable. The time of load shedding has been increasing every summer and so has been the tariff.

It seems that the government is compensating the delinquencies of corporate debts by sucking the money from public's pockets.

IMF conditioned the release of fifth tranche of 1.35 billion dollars with the levying of new taxes and regulatory duties as well as creating new sources of revenues. People criticised the government for its designing of revenue sources without studying ramifications in advance.

Recent announcement of rise in electricity rate by 6 per cent was also disliked by people from all walks of life, are in panic about the next budget. They asked the government that why it should not go for scratching taxes on wealthiest tax evaders if there is question of improving macro economic indicators. It seems that the government wants to do so without realising that it is limiting the breathing space for the people.

First of all, it has failed to control the mounting power crisis in the country despite a plethora of immediate solutions emerged on the media that has assumed the shape of ticking bomb and second it is mindlessly putting the debris of monetary and fiscal mismanagements on poor people. Power sector has emerged as a prime victim of these mismanagements.

Across the country, electricity crisis is eating in to the performances of trade and industries and when it comes to household consumers it can become a stimulant to civic upheavals traces of which have been surfaced in recent past.

The power sector in Pakistan is befitting example of mixed economy since the sector is both managed by public and private sectors. Some say if government reduces its role to a mere regulator then situation can become quite controllable. The awful experience of handling over electricity generation, distribution, and transmission to a private company in Karachi has however dampened the probability of private management's success in power sector. Alone in Karachi, which is a beacon of economic power to the country, the supply and demand gap of electricity has reached to a significant level. Against variable energy needs of the city of 1800 to 2200 megawatts particularly in sweltering summer the demand is on its highest point the supply is too scant. The private manager of electricity sector in Karachi gets not below 600 megawatts from state-owned Wapda and a more than this volume from independent power producers like Tapal. Its own plants are so volatile in production that they are bogged down more often. There may be some intentional halt to power production to lighten cost of oil-fired electricity production and sometime shortage of or suspension in gas supply by SSGC to combined power plants cut short electricity outputs that are not sufficient in accordance with the needs of bulging metropolis of 17 million populace. The stop is often driven by the issues of receivables stakeholders in power sector accrue to each other.