The government has imposed a set of new tariffs on electricity bills, putting the already repressed economy in disarray and industrial growth in doldrums. The problem is the circular debt which is a phenomenon emerging from the difference between higher cost of electricity production and lower collection of revenues from power consumers. The government claims it has to subsidize the shortfall. It makes no difference who is in power – dictatorship, Pakistan People’s Party or the Pakistan Muslim League-Nawaz, all failed to minimize corruption or plug the loopholes, haunting the power generation and distribution companies because the chain of power supply operates in an extremely non-transparent manner. The government has set up a unique system under which the Central Power Purchase Agency purchases each unit produced by generation companies and then sells it to the power distribution companies. The state-owned Water and Power Development Authority produces hydel power and Independent Power Producers use oil from local and international oil marketing companies to generate electricity. It is alleged that the power distribution companies, which are required to make payments to the Central Power Purchasing Agency, are misgoverned and a source of massive corruption.
The process of non-transparent electricity supply creates a vicious circle in the form of circular debt as the cost of providing electricity to consumers is not covered by operating revenues, rendering the distribution companies to use the collected money for their own operations instead of paying it to the purchasing agency. If the purchasing agency does not receive cash, it does not pay to the power generation companies, leading to power shortage in the country. According to a report by the State Bank of Pakistan, the most critical bottleneck in the electricity supply chain is created by the inefficiencies in its distribution network, which is related to load-management and not generation. The current distribution system is unable to supply over 15,000 megawatts of electricity at peak demand hours. The report adds that even if the existing generating units are geared up to operate at three-fourths of their capacity, the country simply does not have the infrastructure to distribute this power to end-users.
Three points are important to streamline the electricity affairs. The government will have to opt for hydel power by building new dams, minimize corruption and take drastic steps to increase capacity building of the government officials. Instead of putting all efforts to start accountability of corrupt elements, the government should devise a transparent administrative system to rid the country of corruption once for all.