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June 25, 2021

Corridors of corruption

LAHORE: Our economy, law and order, and social wellbeing are hostage to the known avenues of corruption that no government dares to remove.

Electricity rates are high because of inefficiencies created in the power sector to mint money at every level -from generation to transmission, distribution and billing. The blame of high cost is passed on to the capacity charges the state has to pay for idle installed capacities. Idle capacities are because of the failure of this regime to maintain industrialisation planned under China-Pakistan Economic Corridor (CPEC). The progress on CPEC has declined to 10 percent of the speed it attained during the tenure of the last regime. That apart the current power tariff is enough to ensure profits in the power sector provided the avenues of corruption are plugged.

We are not talking about reducing inefficiencies but about completely eliminating them and operating as other successful economies are operating their power sector. There is no element of theft in their system, the billed amount is collected on due date otherwise the connection is cut. There are no kundas (getting connection directly from the transmission wire). This practice in Pakistan is done openly. Anyone can see the illegality except the state.

The governance system of the kundas operates with the blessing of local administration. The power distribution companies dare not remove these kundas because of violent resistance from beneficiaries. The local administrations rarely provide security to the staff of distribution companies.

Then there are meter readers that first used to reverse the meters to reduce power bills but this is not possible in new electronic meters. They have found a way out. They replace the electronic meter with a fake meter so that no one notices the missing gadget and replace the original a few days before taking the reading. All this is done at a rent payable to these to the meter reader.

The share of this booty goes up to higher levels. Lastly the billed amounts are fully recovered while the power supply to defaulters continues. If the dues against the government departments and the private sector are fully recovered, half of the circular debt would be reduced. If theft and other inefficiencies are eliminated there would be a surplus instead of circular debt.

All these factors have increased the power tariff much above regional level. Industries consuming costly power are unable to compete globally and locally as well. For some export sectors the government provides power at a highly subsidised rate but the domestic industries catering to local needs have to pay high tariffs. They have to fight on three fronts. First is the high tariff, the second is the influx of heavily under-invoiced imported products they produce locally and third is smuggling.

It is an uphill task to operate with these handicaps. The result is that industries are dying slowly and fresh industrialisation has almost stopped. In fact we are currently in the deindustrialisation phase.

The inefficiency at the power sector opened avenues of corruption in the trade and industry. The traders save levies at import stage. The industrialists conceal production to compete with unethical imports to survive. In the process they also evade huge government levies.

Non-tax paid or lower-tax paid items now dominate Pakistani markets. The retailers are in no position to document the goods for which they receive no receipts either from importers, smugglers’ or industry that concealed production. This way our planners have created a mess in the economy.

The mismanagement has deprived the country of thousands of billions of tax revenues. It has cost the country millions of jobs that have been transferred to countries from where the unethical imports come.

The inability of the economy to create jobs has created unrest among three million youth that enter the job market every year. Social harmony has eroded. Youngsters pick fights on small issues and create law and order situations. Dacoits roam the streets freely even in large cities on a daily basis, thefts, mobile snatching, car, and bike jacking are common. We are bracketed among the countries where the well-being of the citizens is deteriorating and they are the least happy citizens.