Electric shock

Electric shock

The government has raised electricity tariff, once again. According to a notification by the Ministry of Water and Power, new rates will be effective October 1 and additional charges would be collected from consumers in the electricity bills that they would receive in December. The farmers will also have to bear the burden of increase in the electricity tariff. The tariff for domestic consumers will be raised by 30 per cent, announced Federal Finance Minister, Ishaq Dar, in a TV talk show (Geo News Programme ‘Capital Talk’) on November 14, 2013.

Electricity bills as per new rates have given consumers restless nights because abolition of slabs has increased burden on the masses. However, the rationale advanced by the Finance Minister for raising the electricity tariff is untenable because it amounts to punishing the public for blunders – rather sins – committed by minions of the state.

No state in the modern history has placed the education of its young citizens entirely at the mercy of market forces. How it is then that we have responded to the difficulties of public sector by abandoning it altogether?

When the issue of electricity shortage cropped up in the 1990s, the authorities opted to meet the deficit by commissioning furnace oil fired thermal power stations. The per unit cost of producing electricity by oil fired stations is more than double than obtaining it from cheaper sources like hydro, coal, natural gas, synthetic gas, etc.

In Pakistan, till 1990s, energy generation was a mix of two-thirds hydro and one-third thermal. As the cost of hydro electricity is much less, the energy mix prevailing till mid-1990s, enabled the government to provide electricity to consumers at cheaper rates. However, ill-planned commissioning of oil-fired thermal stations in the late 1990s drastically changed the energy mix to two-third thermal and one-third hydro. The reversal of the ratio of energy mix pushed-up the average per unit cost of electricity substantially. Here a question arises why did the authorities decide to opt for oil-fired stations when electricity could have been obtained from cheaper sources?

Since oil-fired thermal stations take less time to commission, may be this factor contributed to the government’s decision to set up oil-fired stations! Being unsustainable in the long run, however, the decision to install oil-fired power stations could have been a stop-gap arrangement and not a long-term solution to the energy crisis. But, continuous and prolonged reliance on oil-fired power stations has created multiple problems (including the vice of circular debt, tariff hike, loadshedding, relocation of some industrial concerns to other countries), negatively impacting the national economy and job situation in the country.

Even Finance Minister Ishaq Dar agrees that the current inflation and price hike is mainly due to increase in international fuel prices. In other words, the mother of the current economic morass in the country is its too much reliance on oil imports. However Dar claims: “The government is sensitive to the hardships of the people and is on an average providing a subsidy of around Rs2.2 billion every month just to lessen the burden of the rise in fuel prices on the common man.” But, instead of holding those persons accountable whose bad policies and wrong decisions have led to this crisis, the government is now punishing the people by substantially raising the electricity tariff at a time when the citizens are already groaning under the weight of double digit inflation.

Meanwhile, Pakistan Hosiery Manufacturers and Exporters Association (PHMA) has revealed that it is negotiating with business-friendly countries in a bid to shift businesses abroad. In a circular to its members, PHMA has asked the exporters interested in moving their businesses abroad to contact it at the earliest, saying PHMA was negotiating with countries having better business and export-friendly policies and “offering attractive incentives to foreign investors as well as permanent citizenship.”

PHMA has constituted a committee to work out a strategy for its leading member exporters who are sick of bad governance in the country, causing worst-ever energy crisis, frequent power outages and increase in tariff for the utilities, deteriorating law and order situation, strikes, liquidity crunch due to huge amounts of outstanding sales tax refunds and customs rebate and high cost of doing business which, according to it, have sounded a death knell for the exporters. The country earns $2.75 billion from the export of hosiery products. If some members of PHMA relocate their business abroad this is bound to negatively impact the country’s economy, in particular export earnings.

To rid themselves of the crippling effects of loadshedding, some industrialists, instead of relocating their factories abroad, have opted for getting installed SNG (synthetic natural gas) plants. Though three times more expensive than the natural gas, SNG is 50 per cent cheaper than furnace oil. Furthermore, SNG is easily available and its plant can be connected to the existing natural gas lines, providing the option to use it during loadshedding hours.

Meanwhile, the Economic Coordination Committee (ECC) has taken the first major step towards an alternative gas pipeline, which involves India and Afghanistan as well, by giving consent to the appointment of Asian Development Bank (ADB) as transaction advisor. The four stakeholder countries – Turkmenistan, Afghanistan, Pakistan and India – are scheduled to meet in Ashkabad and sign the Transaction Advisory Services Agreement. This agreement will enable ADB to find out a leading but technically and financially sound company that could form a consortium to generate the finances for the $7.8 billion Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline spanning over 1600 KM. The TAPI gas pipeline will provide 500 mmcfd gas to Afghanistan and 1,325 bcf gas per day each to Pakistan and India.

The TAPI gas pipeline is supported by the US against the Iran-Pakistan (IP) gas pipeline which has been facing serious problems because of lack of finances. However, Finance Minister Dar says that Pakistan will not abandon the IP gas pipeline project under US pressure, but Iran has backed out from financing it.

Originally styled as Iran-Pakistan-India (IPI) gas pipeline project, India quit it in 2008 after 13 years, but Pakistan and Iran agreed to continue work on it. The IP gas pipeline was to start delivering Iranian gas to Pakistan by 2012. However, various problems delayed its execution. Tehran had agreed to provide Pakistan $500 million loan to partially finance the construction of IP pipelines’ section on its side, which was estimated to cost $1.5 billion. Pakistan had to finance the remaining cost from its own resources.

Though economically non-viable for domestic use because of its higher price, Iranian gas was envisaged to enable Pakistan to generate 5,000 MW of electricity. Abandoning IP project or allowing it to become dormant after negotiations stretching over two decades looks ridiculous. How come the government could not raise one billion dollars for a vital project that it has been negotiating for almost two decades?

Anyhow, there has appeared a silver lining in the statement of Prime Minister Mian Nawaz Sharif, who said that the government is addressing the three Es – economy, energy and extremism – under a well defined plan.

The public can only hope for the best! If the incumbent government could tame and leash the three naughty Es, this step would be construed a feat worth admiring!

Electric shock