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September 7, 2018

PTI decision to raise power tariff counterproductive


September 7, 2018


LAHORE: The Pakistan Tehreek-e-Insaf (PTI) government has increased power tariff by Rs2/unit, raised rates of National Saving Schemes, and also announced gas tariff hike of 46 percent – though implementation has been suspended.

These decisions have been taken in haste, and would be counterproductive in the long-term. One expects a new government to take some tough decisions in its first 100 days when it is at the peak of its popularity.

However, barring proposed increase in gas tariff, the other two decisions are not rational. Still the government is more afraid of increase in gas rates and has decided to deliberate the matter further.

If we look at the network of piped gas supplies, it would be found that only 22 percent of the population of the country has access to gas. The remaining 78 percent have to use alternate fuels like LPG, kerosene oil, coal and wood as their kitchen and heating fuel.

The 22 percent consumers that have gas connections are more affluent than the 78 percent that are denied this utility. The average household gas bill for nine months currently is around Rs200/month.

The bill increases in winter when this gas is used for heating purposes (room heaters and water geysers). The summer bill indicates that if used for cooking purposes only, the bill would be Rs200.

On the other hand, the kitchen fuel expenses of 78 percent poorer segment of society range from Rs1,000/month to Rs1,500/month whatever alternate fuel they use. It is extremely unfair that the poor pay more for kitchen fuel than the affluent class.

If the gas tariff for households is doubled the average bill would increase from Rs200 to Rs400/month. The affluent segment of the society would still be at an advantage over the poor households as far as the cost of kitchen fuel is concerned.

Another thing worth noting is that 95 percent of the gas appliances be it burner, room heater or geyser are highly inefficient. The consumers buy inefficient burners because the gas rate is very cheap.

Some even keep their burners on for 24 hours as they find lightening them frequently with matches as cumbersome. As the gas tariff for households gets higher on higher use, most consumers use efficient geysers and use them prudently.

We are a gas starved country and domestic users consume around 70 percent of gas produced in Pakistan and that too at efficiency of 15-25 percent.

This means that we are wasting 85-75 percent of precious gas because of inefficient appliances.

With increase in gas tariff the consumers would go for efficient appliances. The government should go ahead with increase in gas tariff. It was a folly on part of the previous government not to raise gas tariff for three years.

As far as increase in electricity rates is concerned it is not based on fair play. The actual cost of power in Pakistan is lower and tariff should have been reduced.

Efficient power supply is a management issue. Out of 100 units that are received by the power distribution companies, 40 percent are lost to inefficiency and corruption.

Around 22 percent are so called distribution losses that should not be more than three percent, and the power distribution companies fail to collect 15-20 percent of the power bills.

It is criminal that the private sector consumers owe these companies over Rs400 billion and are still connected. Then there are dues against central and provincial governments that should be deducted at source by the federal government.

Some provinces dispute the billing amount; they should at least pay what they think is actually due and settle the disputed amount within six months. The government should go for efficiency instead of increasing power tariff. Regional power tariff was already much lower even before the increase in power tariff was announced.

The planners know very well that the Directorate of National Savings is a white elephant. It operates like a bank as far as collection of deposits and payment of interest to depositors is concerned.

However, it is not into a rational lending system that ensures sustained growth of the organisation. Whatever deposits it gets in its saving accounts or saving schemes is handed over to the government for consumption.

This unsecured debt is increasing the internal debt liability of the state. The deposits in NSS should be invested in capital market prudently in a way that it generates more income than the interest that is paid to the depositors.

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