The interim Prime Minister of Pakistan, Anwarul Haq Kakar, is grappling with a surge in public discontent as protests persist over soaring electricity bills. The public is demanding more than mere expressions of inability or good intentions from the government.
The unprecedented increase in consumer bills, which sparked nationwide protests, prompted the interim prime minister to convene consecutive emergency meetings to address the crisis and promise relief. However, he found himself facing fiscal constraints and pressure from the International Monetary Fund (IMF).
Ultimately, the prime minister appealed to the public, emphasizing that they must settle their bills due to the government’s limited options. Alongside exorbitant electricity bills, rampant inflation, rising petroleum product prices, and the depreciation of the rupee have significantly exacerbated the hardships faced by the people.
Adding to the frustration, as outrage over astronomical bills and price hikes reached its peak, it was revealed that consumers would have to pay Pakistani Rupees 1.3 trillion in capacity payments to idle power plants in the current financial year.
The higher electricity bills are not solely due to increased energy costs but also the result of high taxes imposed by the government. These taxes make up 40 to 50 percent of each bill and include charges such as electricity duty, TV fees, general sales tax (GST), GST on fuel price adjustments (FPA), and excise duty on the FPA. The government also imposes a 0.5 percent electricity duty on bills, with the revenue going to the provinces.
Additionally, there is a tariff rationalization surcharge of Pakistani Rupees 5 to 7 per unit to ensure uniformity across the country. Consumers are also charged a financial surcharge of Pakistani Rupees 0.43 per unit in their electricity bills.
Commercial and industrial consumers are subjected to income tax, and a general sales tax of 18 percent applies to all electricity consumers. Furthermore, GST is charged on fuel price adjustments, along with excise duty on the FPA.
Power distribution companies include bill adjustments to recover the increased electricity rates from consumers in their current bills. This has led to protests from consumers, especially as the average electricity rates have reached Pakistani Rupees 42 per unit.
Despite concerns over surging electricity bills, experts have criticized the interim government’s approach and called for proactive measures to address ongoing economic challenges. They suggest cost-cutting measures, including freezing wasteful expenditures from the Public Sector Development Program (PSDP), and question the absence of expert panels for negotiations with Independent Power Producers (IPPs).
While the government’s options are limited due to prior commitments with the IMF, experts have urged it to implement cost-cutting measures, emphasizing the importance of cutting government costs and reallocating resources to those in need due to inflated electricity bills.
Moreover, experts recommend improving the governance of institutions such as the National Transmission & Despatch Company (NTDC) and the distribution companies (Discos). They also suggest establishing expert panels to negotiate with IPPs, which are believed to be a major reason behind the high electricity costs.
Despite the constraints faced by the interim government, experts highlight the importance of reassuring markets during turbulent times, as markets are influenced by psychological factors. They emphasize that the government’s failure to soothe market sentiments and provide reassurances is contributing to the worsening economic situation.
While the interim government faces limitations in addressing the electricity bill crisis, experts call for more proactive measures, cost-cutting, and efforts to reassure the markets to alleviate the growing public discontent in Pakistan.
