More surcharges

The government has ceded to another IMF demand, which is set to negatively impact citizens once again. Following on from allowing the rupee to devaluate, Nepra has reportedly allowed the government to impose three new surcharges on electricity consumption. The total surcharges of Rs1.55 per unit of electricity are intended to finance Rs110 billion worth of system losses and electricity theft. Once again, citizens who pay their fair due for consuming electricity are made to pay for the failures of both government and distribution companies to solve the structural issues crippling the power sector. The surcharges include the financing cost surcharge, the Neelum Jhelum surcharge and the tariff rationalisation surcharge. The second of these is designed to pay off the debt of the Power Holding Company where the federal government parked the circular debt accumulated till 2013. The surcharges mean that the government will be able to collect Rs70 billion more from consumers to ease the financial burden in the power sector.

The imposition of the surcharges has been a highly contested issue. The step had earlier been declared unconstitutional by a number of high courts in 2015. Nepra has used the suspension of the high court judgments to impose the surcharges. While accepting the federal government’s request, Nepra has noted that the real problem is the failure of distribution companies to do their job. It has also opened the space for further intervention by those affected against these impositions. So this is not a closed chapter just yet. The surcharges could yet be overturned and the government could be ordered to return any collection to those affected. But this is a risk the government has been ready to take. It seems simpler to impose surcharges, instead of work towards power-sector reform. It is also ironic that consumers are being made to paid extra in a context where the government has not begun to clamp down on the almost Rs70 billion in overcharging by distribution companies. It seems surcharges and overbilling are two ways of jointly fleecing power consumers mainly due to a lack of reforms in the sector. The imposition of surcharges is not a solution to the problems in the power sector. It is merely a band-aid being applied to an overflowing wound.