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Business Recorder

Published Date: Apr 28, 2014

Revisiting “energy” before the budget

In the run up to the Federal Budget FY15, Sustainable
Development Policy Institute’s latest survey on pressing economic reforms is
hopefully a timely reminder for the policy makers. The government is still a
long way from striking off energy crisis from its list of challenges, and
findings from SDPI’s household and firm level survey can act as inputs to
policy making at some point soon.

An intriguing insight from a survey that reached out to 3800 households and 300
firms (formal and informal) across the country is the clear lack of awareness
among the firms and the households about some major causes of the energy
crisis; they all acknowledge the existence of the problem but their myopic and
populist views have created a disconnect between them and the core reasons to
energy crisis. And this is where the government oversight in its inability to
form correct perceptions comes in.

According to survey results, households and firms are aware of the power
shortfall and the subsequent load shedding; what they miss is the understanding
that load shedding is in fact taking place due to full economic cost of
electricity not being paid by the customers. There is a lack of understanding
that subsidies are not for everyone and lifelong with the perception that lack
of domestic subsidies has led to poor competitiveness of Pakistan’s exports.

Similarly, a significant proportion of the households feel that any reforms in
the energy sector should focus on bringing down the electricity tariffs with
minimal idea that they are already receiving electricity at subsidised rates.
29 percent of the household respondents feel that the Government’s single most
important priority in energy sector for short term should be keeping
electricity prices low.

This shows sheer lack of communication and outreach on government’s part to
create mass awareness about such a persistent issue. Talking to BR Research,
Dr. Vaqar Ahmed, Deputy Executive Director at SDPI, highlighted that all 300
firms surveyed were unsure whether to plan long term investment in the country
given the lack of collaboration with business communities and the government in
solving the energy crisis in the short term and the long term.

However, the survey results also show that the firms and households acknowledge
that the key to solve energy crisis lies in tackling power thefts and pilferages.
51 percent of the households feel that reducing electricity theft is the single
most important step to overcome the energy crisis; 42 percent of the households
have noticed electricity theft in their areas; 53 percent of the firms have
knowledge of the same. If the government could take the not-so-popular steps
like power tariff increase, combatting electricity theft should be relatively
easy since it has public support.

This point towards another lacuna in government policy: the approach towards
governance. The policy makers should work on improving transparency and
accountability mechanism in the sector. SDPI suggests speedy privatisation of
distribution companies (Discos) and generating companies (Gencos); until such
time it proposes that the basis for fuel availability for Gencos and IPPs to be
based efficiency.

Another major reform sector has been government’s revenue collection, which is
inflicted with similar transparency and governance issues. What entry points
does the survey leave for the policy makers in tax reforms?