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Featured Govt unlikely to protect consumers using up to 300 units

Kabira

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ISLAMABAD: The federal government is unlikely to protect poor consumers using up to 300 units monthly due to major reduction in subsidies coupled with the impact of Covid-19, as well as consistent devaluation of the rupee, even if there is no increase in tariff.


This was apprehended by former Secretary Power, Irfan Ali, who was made OSD due to his bold stance on some issues, in a letter to his successor, Omar Rasul.

Irfan Ali, in his letter written last month, argued it would be naive and wrong on the part of policy makers to shift the entire onus of the circular debt on the inefficiencies attributed to the distribution system.

"In the last 18 months a major and concerted effort has taken place in all Discos to reduce losses and theft as a result of which an overall improvement in recoveries and sustained reduction in line losses has taken place. These improvements were shared with the IMF who agreed with the theme and the direction of the effort put in place by the Power Division," he added.

Former Secretary maintained that as a result of these improvements and mutually negotiated agreement between the Power, Finance and IMF teams, a Circular Debt (CD) capping plan was approved and put into action. The plan was based on the assumption that regular quarterly adjustments, fuel price adjustments as well as budgeting and payment of subsidies would be put in place.

The ultimate aim of the circular debt capping plan was a target of gradual reduction of the quarterly flow/increase of circular debt, reducing it by less than Rs 8 billion per month by December 2020. In December 2019, the flow of CD was Rs 12-15 billion per month as compared to Rs 30-35 billion in first two quarters of 2018.

It was at this point in time that the government decided to disallow any further increase in the form of quarterly adjustments of tariff or monthly fuel adjustments, he added.

"We need to remember, at this point, that the increase in cost of electricity was due to major devaluation of the Rupee which had an overriding impact on the capacity costs as well as cost of fuel. Despite what various financial wizards and reform pundits started saying at that stage, laying all the blame on distribution in-efficiencies, the real reason for the price hike was the policy leading to sudden and steep devaluation of Rupee," he continued.

The Power Division submitted an ingenious and well thought out plan to stagger the increase of costs over the next few quarters, but the plan, despite the IMF's readiness to listen to Power Division's suggestions, was not supported or adopted at the Government's level.

"We gave presentations to the ECC, Nepra, the PM and the Cabinet but except for the PM, the others did not give due thought as a result of which stranded costs began to rise and add to the circular debt," said, Irfan Ali,

Up till February 2020, Power Division had sustained a recovery level above 90% against all units billed, when Covid-19 pandemic set in and reduced the recovery levels to 40-50% in the next 3 months. By this time NTDC had increased its transmission capacity to almost 26,000 MW and it was hoped that with increased transmission capacity, the summer months would bring about a major increase in income and recoveries, on the condition that antitheft operations in the field continue.

"Let me also add that these operations are completely dependent on the principles of merit-based placement of human resource and administrative support to the operational staff. Any politicization in postings and leniency towards corruption would unfortunately bring an effective end to what we have tried to achieve," he further stated.

Talking about subsidies, former Secretary said, he has now been informed that against the demand of Rs 266 billion as subsidy, only a sum of Rs. 150 billion has been budgeted.

He pointed out that despite serious limitations, Power Division has been doing its best to ensure that poor classes of consumers are not directly affected by any increase in tariff.

Some major steps/principles that were adopted to ensure that the poor are protected are as follows: (i) our foremost effort over these 22 months was that no price be increased for domestic consumers up to 300 units' consumption. Power Division refused to agree with the IMF proposals till they agreed to the protection of domestic consumers up to 300 units. It was in the 3rd quarter of 2019 when they agreed to recommend an additional subsidy of Rs 56 billion for these consumers. Not only this but small commercial consumers and agricultural tube-wells were also protected through an element of cross subsidy.

Power Division also did not place an additional burden of Rs 146 billion on consumers associated with Net Hydel Profit (NHP) and requested Nepra to stagger that impact.

"I am afraid that with a major reduction in subsidies coupled with the impact of Covid-19, as well as consistent devaluation of the rupee, the power sector would no longer be able to protect poor consumers using up to 300 units even if there is no increase in tariff," he said.

Irfan Ali has suggested to his successor, the following steps for consideration; (i) Finance Division may immediately be requested to rationalize the amount of subsidy in the light of Power Division's letter of June 19, 2020;(ii) protection to domestic consumers up to 300 units needs to be ensured and similarly agricultural subsidy needs to be understood as it relates to food prices and not land holdings. (iii) The plan for staggering of cost as prepared by Abid Lodhi and his team at CPPA-G may be reconsidered and revisited keeping in mind the subsequent impact of Covid-19. The plan also envisaged a reduction in the cost of electricity of industrial consumers to ensure increase in industrial demand, keeping in mind our enhanced transmission capability (iii) Based on facts, negotiations with IMF would be essential for revising the circular debt capping plan. It must not be forgotten that blind increase in cost would result in social upheaval and a steep increase in power theft; (iv) Field operations need to be continued unabated which is only possible if merit and support are continued and any spate of politically motivated transfers and postings is resisted steadfastly. It is also important that corrupt elements that were identified and proceeded against are not dealt with leniently.

Insiders, however, told Business Recorder that many of the measures/actions taken have been set aside. Ban on transfers and postings has also been lifted under pressure from political figures who did not succeed during the time of former Secretary.

Copyright Business Recorder, 2020


 

IceCold

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so in short
more difficulties for the common man.
thanks PTI
Thanks belong to the previous governments, PTI is fixing the mess, hence the effects. Had the nation awaken early, we would be in a different position altogether. There was a reason world use to look at Pakistan as a model up till 60s and than all went to shit. Stop laying every blame on PTI for the decade of mess of the past governments.
 

Jf Thunder

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Thanks belong to the previous governments, PTI is fixing the mess, hence the effects. Had the nation awaken early, we would be in a different position altogether. There was a reason world use to look at Pakistan as a model up till 60s and than all went to shit. Stop laying every blame on PTI for the decade of mess of the past governments.
we all will get the same response at the end of 5 years, when all the poor people are dead, the middle class has become poor, and Jehangir Tareen will be even more rich.

at the end of 5 years PTI be like: We cant fix the mess of the previous Govts in 5 years, give us another term.
 

IceCold

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we all will get the same response at the end of 5 years, when all the poor people are dead, the middle class has become poor, and Jehangir Tareen will be even more rich.

at the end of 5 years PTI be like: We cant fix the mess of the previous Govts in 5 years, give us another term.
We will worry about that after 5 years. For now lets stick to the present.
 

ziaulislam

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i thought 50 units were poor.(1-2 fans for 12 hours and 3 energy saver for 5-6 hours and a small refrid = 2kwhr/day=60 units/month)
since when is 300 units a poor household, this is mostly a middle income population

also what about 30% population that has no power?

so should IK collect tax from everyone including the 30% with no power and subsidize the middle class?
 

ziaulislam

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there are only two options
1. subsidize or 2. ncrease circular debt

no.2 is not an option any more(used up PML N)

so now what?
everyone is ready to curse but will someone come up with solutions..please dont say choree..even if choree is exculded the price difference exist in tarrif

third option is to invest now in hydro and renegotiate khadm-i-ala expensive power deal..is someone doing that now?
 

Flash_Ninja

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we all will get the same response at the end of 5 years, when all the poor people are dead, the middle class has become poor, and Jehangir Tareen will be even more rich.

at the end of 5 years PTI be like: We cant fix the mess of the previous Govts in 5 years, give us another term.
PTI policy is basically short term difficulties for long term benefit so it will take time to see results.

Still with better welfare, housing, and education coming things might look better at the end of their 5 years,
 

Xone

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Thanks belong to the previous governments, PTI is fixing the mess, hence the effects. Had the nation awaken early, we would be in a different position altogether. There was a reason world use to look at Pakistan as a model up till 60s and than all went to shit. Stop laying every blame on PTI for the decade of mess of the past governments.
So what is PTI for? Blaming others for the incompetence of their own. have you ever studied business environments? which one is the most important factor defining such environments?
to evaluate such conditions a tool called a PESTLE analysis is used.
PESTEL, denote the following things:
  • Political factors
  • Economic factors
  • Social factors
  • Technological factors
  • Legal factors
  • Environmental factor
If we analyze PTI time, Pakistan is going through the worst kind of mudslinging and political instability where oppositions parties are declared corrupt and a bunch of traitors, Noone knows what would be the outcome of present political management.
The same is the sate of our economy, the lowest ever growth rate highest exchange rate, no jobs. PTI has brought about a tsunami in Pakistan, even the economy is not spared from this tsunami, the Growth rate has brought down from 5.8 to minus growth rate.
Oh yeah PTI will not leave NS and PPP.
Technology has been a weak point for Pakistan, Instead of engineering our target remains engineered political outcome. A lot of money is required for education technology-related fields, When there is no money for the running country who cares about technology,
Legal matters do not paint a favorable picture too. Day today Courts' decisions reflect the crumbling picture of rule of law, The Strong is above law and while poor may be lifted in broad daylight without any charge, all this happens only in our dear homeland,
The environment is not our plus point even, our cities are polluting,
all these factors will not bring about any positive change in our county. and PTI is surely responsible for worsening these factors. who is stopping PTI from not improving these, but its priorities appear to tarnish politicians credibility and destroying every business which may still be running on in Pakistan,
 

IceCold

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So what is PTI for? Blaming others for the incompetence of their own. have you ever studied business environments? which one is the most important factor defining such environments?
to evaluate such conditions a tool called a PESTLE analysis is used.
PESTEL, denote the following things:
  • Political factors
  • Economic factors
  • Social factors
  • Technological factors
  • Legal factors
  • Environmental factor
If we analyze PTI time, Pakistan is going through the worst kind of mudslinging and political instability where oppositions parties are declared corrupt and a bunch of traitors, Noone knows what would be the outcome of present political management.
The same is the sate of our economy, the lowest ever growth rate highest exchange rate, no jobs. PTI has brought about a tsunami in Pakistan, even the economy is not spared from this tsunami, the Growth rate has brought down from 5.8 to minus growth rate.
Oh yeah PTI will not leave NS and PPP.
Technology has been a weak point for Pakistan, Instead of engineering our target remains engineered political outcome. A lot of money is required for education technology-related fields, When there is no money for the running country who cares about technology,
Legal matters do not paint a favorable picture too. Day today Courts' decisions reflect the crumbling picture of rule of law, The Strong is above law and while poor may be lifted in broad daylight without any charge, all this happens only in our dear homeland,
The environment is not our plus point even, our cities are polluting,
all these factors will not bring about any positive change in our county. and PTI is surely responsible for worsening these factors. who is stopping PTI from not improving these, but its priorities appear to tarnish politicians credibility and destroying every business which may still be running on in Pakistan,
Here comes another intellectual shedding his pearls of wisdom. Let be honest i did not bothered to read your rant because its a waste of my time but instead of lecturing me on business, learn a few lessons about economy 1st.
 

Xone

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Here comes another intellectual shedding his pearls of wisdom. Let be honest i did not bothered to read your rant because its a waste of my time but instead of lecturing me on business, learn a few lessons about economy 1st.
learning starts with mistakes and admitting them, But some people are above human beings to make mistakes and need to correction. Angels at the best, making absurd of everything coming across.
 

Jf Thunder

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PTI policy is basically short term difficulties for long term benefit so it will take time to see results.

Still with better welfare, housing, and education coming things might look better at the end of their 5 years,
it might look better for those who live through this.
 

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