It does not augur well for Pakistan’s caretaker government when one of its leading members, Dr. Shamshad Akhtar, federal minister for finance, evinced her helplessness regarding the current economic situation especially when people are on street protesting against inlfated electricity bills.
She repeated the tried-and-tested formula of expressing her desperation at the economic prospects and regretted her taking on her current responsibility. This certainly is not a good beginning as the caretakers were being touted as the panacea for all ills as their incumbency was attributed to the powerful establishment but what has come out of the expressions of Dr. Akhtar is that the incumbent dispensation is being put just to maintain the status quo. It is quite clear that the roadmap set for the next few months is to release the heat produced by the political mistakes committed by the arbitrary forces over the last half a decade.
It is also obvious that except for working for this purpose there is no plan to bring about any positive change in the crucial economic situation of Pakistan.
The criticality of the situation can be gauged by the protests taking place in the length and breadth of Pakistan about bloated electricity bills that have broken the back of the common man.
The simmering discontent in the country on account of escalating cost of living has now exploded into mass protests. People are now on the streets threatening to create a situation that may prove difficult for the state apparatus to control. The caretaker administration appears to be critically trapped between adherence to the IMF deal and growing unrest in the country. It is acknowledged however that the excessively priced electricity is the result of structural problems that have been aggravated by flawed policies pursued by successive governments over the past several decades.
Any quick-fix of such a chronic problem is just not possible as resolving it would require vast systemic changes that is simply beyond the capacity of a caretaker government that is fast appearing to lack mooring.
The current crisis regarding inflated electricity bill is the outcome of multiple taxes and surcharges imposed by the federal government in electricity bills that are widely taken as extortion by a state unable to collect taxes from the politically powerful landed and business classes and feels comfortable in shifting blame to the already overtaxed middle and lower middle classes.
The spate of public protests has brought to fore yet again the inherent contradictions in the Pakistani polity where the existing power structure has miserably failed in delivering equitably to the populace.
The current situation is that NEPRA, the power regulator raised the national average tariff by around Rs.5 per unit pushing the base unit power tariff from Rs.24.82 to Rs.29.78. On 22 August, the government once again sought to raise the power rate by Rs.3.55 per unit.
It was explained that the NEPRA determined electricity tariffs using three distinct methodologies, adding that the Rs.5.40 per unit additional quarterly tariff adjustment (QTA) for April-June was meant for new power plants.
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Moreover, electricity prices were subject to fluctuations based on the Consumer Price Index. Then there is necessity of tariff alterations due to the upsurge in the Karachi Inter-Bank Offered Rate or Kibor rate — which are quoted on a daily basis by a large number of banks to indicate the cost of borrowing and lending money for tenors ranging between one week and 3 years. In addition to this, fuel price adjustments also impacted electricity costs. In the fiscal year 2023, the tariff was initially set at Rs.195 per dollar but the value of the dollar surged to Rs.284.
It was initially aimed to set the price of RNLG which is used as fuel for electricity generation at Rs.3,183 per mmBtu, however, the actual price ranged between Rs.3,000 and Rs.3,800. Similarly, the price range for imported coal remained between Rs.51,000 and Rs.61,000 per metric ton. Moreover, Rs.2 trillion would be exclusively allocated to capacity payments in the upcoming year.
The official circles insist that the increase in electricity tariffs predominantly affected consumers utilising more than 400 units, adding the tariff remained unchanged for 63.5 per cent of domestic consumers. For 31.6 per cent of domestic consumers, prices saw an uptick of up to Rs.6.5 per unit, and a tariff of Rs.7.5 per unit was only applied to 4.9 per cent of domestic consumers.
They asserted that the average tariff increases for domestic consumers stood at Rs.3.82. In July 2022, the highest recorded electricity tariff was Rs.31.02 per unit and that by August 2023, the price had increased to Rs.33.89 per unit. The official also confirmed that the facility of free electricity units to officers of power distribution companies would be discontinued insisting that the burden was not being transferred to regular bill-paying individuals.
For the moment however, this situation has also put the political parties to a tough test that they find difficult to negotiate. They may try to shift the blame of the ongoing economic decline to their predecessors or successors but they cannot convince the electorate and for this reason they are complicit in delaying the elections though that may not absolve them at all. Some political parties joined them to cash in on the growing discontent but that may not bear much fruit.
Once the protests broke out the caretaker government naturally felt the heat and hastily convened a meeting to find a way to provide some relief to frustrated power consumers. But how would it be possible is anybody’s guess. Actually, the caretakers have little space to help inflation-stricken citizens without compromising on the fiscal goals of the present IMF programme that would be disastrous for the economy as it could make the multilateral lender suspend or terminate the programme.
There is hardly any doubt that the increasing price of electricity is essentially a governance and fiscal problem that has plagued the country for many decades. The only method adopted by successive governments was to impose heavy indirect taxes on fuels and power bills to pay for the state’s ballooning expenditure instead of effectively taxing powerful lobbies like retailers, real estate and agriculture because of their political clout.
The very failure of the ruling classes to implement energy sector reforms aimed at controlling growing electricity theft and bringing efficiency to the entire utility providing segment of the country has brought the country to this pass. It is more than clear that the surging fuel and energy costs are devastating not only for the working-class and salaried households, as well as industry.
The ruling classes have no cause to worry from escalating prices and utility bills as they can very well afford them but the common man is put to peril. The current situation is that any chance of the caretakers providing relief to the consumers are virtually nil it cannot reduce the exorbitant charges it has imposed without an IMF waiver.
At best, they can offer consumers the facility of paying their bills in instalments but this surely no solution to the problem. The toxic mix of inflation and economic recession over the last two years, coupled with inequitable tax policies, have brought households under renewed pressure. T
