he ongoing debate regarding providing relief to the people affected by high electricity bills has so far yielded no positive result. The issue has been under discussion in the Senate, as well as in the federal cabinet.

The popular perception so far is that the deliberations in the power corridors are only for public consumption. For the time being, no concessions can be given by the government to the consumers without the approval of the International Monetary Fund.

Earlier, the government had asked the IMF to approve a number of steps to provide some relief to low and middle-income consumers. During its interaction with IMF officials, the government had sought to assure them that the relief package would cost around Rs 5 billion. The IMF refused to approve the relief package. It also pointed out that the concessions the government was seeking would cost the exchequer Rs 16 billion – three times more than the government’s estimate. Such flawed estimates tend to raise the level of mistrust between the government and the lenders.

With the government hands tied, it looks like it is trying to buy time by telling the consumers to pay the inflated bills and promising adjustments later on. The sultry heat in the country has also not helped the government’s cause. Over the last two months, the use of power has increased. The government was apparently expecting relatively mild weather in August and September. That would have reduced the power use. The planners now expect that power consumption will decrease in two months’ time with the arrival of winter. The relief will come from lower use of power rather than any policy intervention.

On the other hand, the government is now worried about a further increase in power rates under the IMF agreement due the higher fuel prices. In recent months, the declining value of the rupee has made power production even costlier. The government’s proposal to defer the fuel-related tariff revision until winter months has not been accepted by the donor agency.

The government was expecting relatively mild weather in August and September. That would have reduced the power use. The planners now expect that power consumption will decrease in two months’ time with the arrival of winter. The relief in bills will come from the lower use of power and not from any policy intervention.

A standing committee of the Senate has recommended that the power sector regulator remove the taxes from the electricity bills of those consuming up to 400 units. The senators described the unrest over inflated power bills across the country a national crisis. Perhaps the committee, which met with Rana Maqbool Ahmad in the chair, was unaware that the taxes on power bills are part of the IMF deal and cannot be withdrawn without its approval. It is ironic that as power tariff increases, collection of taxes such as sales tax also increases. The current rate of sales tax is 18 percent. A Rs 10 increase in power tariff thus adds Rs 1.8 under the head of the sales tax. No wonder the effective cost of electricity has doubled over the last three months to about Rs 50 per kilowatt hour. Petrol prices have shot up from Rs 262 a liter in June to Rs 305 with another surge after September 16.

It is strange that the Senate committee did not deliberate alternative taxation measures to persuade the IMF. The Fund was always going to object to a tax waiver as these taxes are part of a larger plan to increase revenues. The Senate committee might instead have proposed the withdrawal of the free electricity facility currently available to many government officers or a partial reduction. The resulting savings could have helped the situation. One aspect of free electricity provision that has been missing from the debate is that the tax associated with power bills is also waived with free electricity. If taxes and levies that other consumers pay on their bills are levied on beneficiaries of free power, such consumers might use the free power more frugally.

It no longer comes as a surprise that the government has responded to the crisis by the time-tested method of announcing a drive to punish power thieves and corrupt officials. Similar announcements in the past have failed to bring about positive change. Reform in the power system alone will provide sustainable relief to the consumers.

Protests against rising electricity and petrol prices have rocked Pakistan in recent weeks. The protests largely remained peaceful but thousands of people took to the streets in various cities. Some of them set their electricity bills on fire. Pakistan is in the midst of political and economic turmoil. There was a one-day shutters-down strike in many of the big cities last Saturday against power tariff hike. However, no untoward incident was reported during the protests.

The writer is a senior Lahore-based economic reporter at The News International