Addressing a complicated issue
At last realization has come about big damage that irrationally high gas and electricity tariff s are inflicting on the economy. The thermal power generation agreements of second and last PPP governments and thermal power ones of last PML-N government were of shady nature, making the electricity tariff high for all categories of consumers. The harmful impact of hydel power agreements made by the latters’ previous government is yet to come. Coal power tariff of 8 cents was greed with Chinese electricity producing companies and almost three times high capital expenditure was allowed for hydel power projects as compared with the reference cost of Dasu Hydropower project. PML-N government also made non-transparent LNG import deal to keep the economy crippled for r 15 years.Hypocritically, leaders of two major opposition parties lambast the PTI government for inflation and depressed GDP growth to shield the landmines that previous governments laid to blast the economy. The present government is facing Catch 22 situation when it takes measures to clear the mess created by the government s of other two mainstream political parties.
Prime Minister Imran Khan chaired a high level meeting to discuss proposal to see short term solution of lowering electricity and gas prices and long term plan for providing these energy inputs to industrial, commercial and domestic consumers at affordable tariffs.
The average price of electricity in Pakistan is Rs.27 per unit whereas in majority of countries in the world its price is Rs.11 per unit. In some countries like Bangladesh and India it is less than Rs.10 per unit. All categories of consumers in the country pay a huge price differential of Rs.16 per unit. But the power sector circular debt is not coming down and has gone up to Rs. 2 trillion despite the fact that consumers have pay addionalRs.1000 billion annually if compared with the price of electricity in others countries of the region. The circular debt is piling because of accumulated arrears payable to IPPs on account of idle 'capacity trap' clause incorporated in Power Purchase agreement made with them in 1994.
India purchased LNG from Qatar at$2.80 per mmbtu early this month. On the contrary, RLNG price in Pakistan has been fixed at $11.943 per mmbtu for Southern Sui Gas Company distribution system. The price differential of $10.462 is quite mind boggling if the 'take or pay' clause in LNG imports agreement of PML-N government is not taken into account.
The legacy of macroeconomic imbalances necessitated availing frontloaded IMF loan programme of $6 billion to avoid default situation. But interestingly, opposition lawmakers in Senate attributed the prevailing high rate of inflation to terms and conditions with this global lending agency. They asked the government to disclose the Nitti Gritty of agreement made with the IMF. The demand would have been justified had the conditions of earlier 12 IMF bailout packages for shoring up fast depleting foreign exchange reserves had been made public by PPP and PML-N governments in the past. Likewise, the PML-N government did not put before the parliament the highest interest rate bearing loan agreements with China.
Renegotiation of electricity tariff with Chinese electricity producing companies may not be possible. However, it is a matter of record that federal government once succeeded in renegotiating power purchase agreements with IPPs in the year 2000.Likewise, the sanctioned loan of Asian Development Bank can be availed for upgrading the rag-tag electricity transmission and distribution system to reduce technical losses. If these two things are done lowering of electricity tariff is possible. LNG import agreement cannot be renegotiated till 2030. Strong actions against pilfers and improvement in the distribution system will help reduce gas price if production from local reserves is boosted.