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Editorial: Another Crisis for Pakistan

A surge in electricity prices threatens to spiral into demonstrations that will prove punishing for consumers and authorities alike

by Editorial

File photo. Farooq Naeem—AFP

It is customary to criticize any increase to electricity tariffs, no matter how economically essential they may be, because of the pain they inflict, especially on the less affluent segments of society. However, the recent surge in prices—an average jump of Rs. 7.5/unit to the base tariff as well as new burdensome taxes—has proven punishing for all segments of society, triggering a vicious cycle of declining consumption that leads to ever-increasing rates to meet fuel costs and capacity charges, as well as rein in a massive circular debt. And there is more to come.

In a recent public hearing, the government requested the National Electric Power Regulatory Authority (NEPRA) to space out quarterly adjustment charges of Rs. 5.4/unit for April-June 2023 over six months rather than three, charging Rs. 3.55/unit to reduce the impact on consumers already reeling from last month’s price hike. The situation is worsened by a freefall of the rupee against the U.S. dollar, boosting fuel costs and capacity costs, thus requiring even higher adjustment charges that the populace can no longer afford. Under the government’s plan, consumers would pay Rs. 49.35/unit during peak hours of 5 p.m.-11 p.m., while the non-peak cost has been set at Rs. 33.3/unit. This is not including the quarterly adjustment charges that are imposed on the basis of fuel costs, which have ballooned as this year’s budget pegged the dollar at Rs. 286, while it is already trading at over Rs. 300 in the interbank market for the first time in the country’s history.

According to a report published by Arif Habib Limited, Pakistan’s power generation declined by 9.5% year-on-year in fiscal year 2023, largely due to lower production triggered by the ongoing economic slowdown, as well as the hike in electricity tariffs causing reduced domestic consumption. To make up the numbers, and meet punishing demands by the International Monetary Fund (IMF), higher tariffs would likely be imposed in the months to come. This is unsustainable. A civil disobedience movement that started in Azad Jammu and Kashmir, with people refusing to pay hefty electricity bills, has already started to spread to the rest of the country, setting the stage for further pain as the public faces off against authorities. If the government fails to take corrective measures, and soon, no amount of tariff increases will be enough to recover costs if the people simply choose to not use electricity—or just not pay for the amount they do utilize.

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