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The government’s recent announcement of a reduction in electricity prices was widely welcomed, but whether it will actually be implemented remains to be seen. The announcement was part of a deal to appease Jamaat, whose members have canceled plans to protest against the surge in electricity prices in the capital.
However, many experts point out that the government’s power is constrained by factors beyond its control – electricity prices remain heavily dependent on external factors, while the broader loan agreement with the IMF requires Pakistan to reduce its debt, which means that electricity prices must also be kept at a level that can repay or at least stabilize the debt. The JI and other political parties are fully aware of the problem, which is why, despite all the complaints, no one seems to have any practical alternative solutions.
Solutions currently include hopes for lower energy prices in international markets, a stable rupee and renegotiated contracts with independent power producers (IPPs). Opposition parties have been quick to seize on IPP contracts as arguably the quickest and easiest endgame to achieve. The government already has plans to review old IPP deals, many of which are around 30 years old. Energy Minister Awais Leghari also said contracts with around 15 companies are set to be cancelled.
The government’s proposal to revise the policy for electricity consumption exceeding 201 units and introduce special rate reductions suggests that the government is taking a chance on the other side. While the move will help some consumers, the loss of income will have to be made up by others, from those living in luxury homes to those who use slightly over the limit.
While the new National Power Reform Task Force recently formed by the Prime Minister hopes to further mitigate the impact of cost increases while studying ways to cut costs, the government must ensure that relief measures and even further price increases are implemented transparently and effectively, as much of the hostility directed at Islamabad stems from the seemingly arbitrary manner in which recent price increases were announced and the lack of clear rationale in terms of timing.
One solution might be to provide a more detailed breakdown of where cash flows and which part of the equation requires a price change. Transparent communication won’t necessarily make price increases easier to accept, but it will reduce conspiracy theory resistance while increasing consumer confidence and trust.
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