Increasing Power Tariffs

Due to the ongoing circular debt crisis, electricity rates have been increased by Rs1.95 per unit. While the Finance Minister for Energy, Omar Ayub Khan, blames past governments for neglecting the pertinent issue—rightfully so—it is also worth noting that PTI’s tenure has also seen a sharp increase in debt accumulation. As such, to deflect blame entirely is massively unfair. Instead, it is vital to understand that increasing the power tariff is going to burden domestic consumers the most—a faction that neither enjoys subsidies, unlike various industries, nor an uninterrupted provision of electric supply. In light of this, what the government must do is to focus on a more permanent solution.

It is true that past governments failed to handle agreements with Independent Power Producers (IPP) effectively. Furthermore, they were unable to fulfil necessary payments and increase production capacity within the power sector as well for several years. But this has changed gradually.

As such, PTI stepped into an already impossible situation. However, circular debt has risen exponentially in the past two years as well—accumulating over Rs155 billion within the first five months of Fiscal Year 2021 alone. If the government is generating Rs31 million in debt every month, it means that a serious lack of planning and coordination has made matters much worse. Slowly, we have come to a point where increasing power tariffs is the only viable solution and while it is understandable that necessity dictates this decision, the government must channel all efforts towards creating a more viable long-term solution.

Through regulating all revenue and payment schemes along the supply chain, the government can ensure that all deals with IPPs and national suppliers are appropriate, comprehensive and involve diligence in the exchange of capital. Furthermore, it must also work towards eliminating the issue of inefficient electricity transmission as well as theft. This would ensure that unnecessary losses are avoided completely. If, like their predecessors, the government ignores to employ such solutions, we will find ourselves in the same unfortunate condition once again.

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