Power punch
Thursday, July 09, 2009
The World Bank is often viewed as something of a pain in the proverbial neck, even by its supporters; and a tool of the great powers that sit either within its staff or in a shadowy background. It may well be guilty as charged on both counts but it also is able to hit the nail squarely on the head on occasion – and rarely more so than in the recent report on the power crisis that blights the lives of all of us. The draft report was actually issued in March, before the heat of summer was upon us, before the huge power cuts in Karachi and before burned wires at one of our major dams further reduced our power-generating capacity. It is a ruthless expose that lays bare the corruption, malfeasance, bad management and inefficiency that is today crippling our economy. Once again we join the bottom of another list. We have become the worst performer in the world after Egypt when it comes to the wait for a new connection – be it business or domestic. When we do finally get power to our houses or businesses we pay 60 per cent more for it than the Indians do and 40 per cent more than the Bangladeshis. Bribery is the only way that a majority of firms get their connection with 84 per cent of companies saying they had to make what is euphemistically referred to as an 'informal payment' to get connected. In the big cities and larger towns up to 50 per cent of all electricity is stolen via illegal connections. Only around 65 per cent of the population is connected to the national grid anyway and those that are connected suffer inefficient billing and unannounced loadshedding. Small wonder that our economy is in tatters.
The proposal by NEPRA (National Electric Power Regulatory Authority) to raise power prices yet again has been stalled by the Supreme Court, which has come to the rescue by seeking a review of the decision which may have been taken without following NEPRA's own internal procedures. The report goes on to detail deficits in generation, distribution, political will to solve the problem, pricing tariffs, inadequate regulation of the power sector generally, delays in connection and corruption – to name but a few. The power crisis connects to and fuels many of the other problems that beset us today. Civil unrest is beginning to spread. Manufacturing is crippled. Small and medium-sized businesses are failing because they either cannot produce the goods or service the debt that they need to take to continue production – or a combination of both. The dams which should have been built a decade ago weren't and the single large dam about to commence construction is many years from completion. The private power producers are caught in the vice of circular debt and the promise that loadshedding will have 'ended by December 2009' is sounding increasingly hollow and desperate. The World Bank report concludes by recommending that the power sector needs to achieve financial sustainability to enable better maintenance and future expansion; and therein lies the rub. We all know what is needed, and equally know that the powers that be are unlikely to be able to deliver. A consequence of that will be that we will go to the top of another list - and become the worlds' leading generator of darkness.
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Carbon tax suspension
Thursday, July 09, 2009
The ruling by the Supreme Court that the newly imposed carbon surcharge should be temporarily suspended was received with jubilation by the hard-pressed public but put the country's economic managers in a quandary. The Supreme Court will resume deliberation on its decision on July 9 when it will reconvene and announce a final decision. The changes in pricing are not insignificant. According to an Oil and Gas Regulatory Authority (OGRA) notification which was issued late on Tuesday, the government has withdrawn the carbon surcharge and reduced POL prices. The reductions came into effect on Wednesday. According to the notification, petrol prices have been reduced by Rs11.55 per litre to Rs50.58 from 62.13, a reduction of 18.6 per cent; HOBC prices by Rs16.24 per litre to Rs62.54 from 78.78, a reduction of 20 per cent; kerosene oil prices by Rs6.46 per litre to Rs52.89 from Rs59.35, a reduction of 11 per cent; and light diesel oil prices by Rs3.48 per litre to Rs51.46 from Rs54.94, a reduction of 6.33 per cent. These reductions put them back – more or less – to where they were before the budget was announced.
The ruling comes after the filing of petitions against the carbon surcharge by both a representative of the ruling PPP and the opposition PML-N. PPP Senator Rukhsana Zubairi and PML-N Secretary General Iqbal Zafar Jhagra had filed separate petitions challenging the increase in petroleum prices. It is in the court's short order that matters begin to get both interesting and complicated. In the short order, the court said as the government had made no effort to protect the environment through carbon tax; then it had no right to charge people for the facility – which if nothing else will have been a sharp smack across the face to whoever drafted the section of the budget that sought to camouflage an increase in an indirect tax under the guise of some sort of 'green' hocus-pocus.
The court also summoned the environment secretary at the next hearing for an explanation on whether the ministry had proposed the carbon tax. If, as may well transpire, the environment secretary knew as much about the proposal as he does about the fundamentals of quantum physics then we may assume that the left and right hands of governance are incommunicado. Also appearing in court was the governments Excuse-Maker-in-Chief, the Attorney General Latif Khosa. He told the court that the government had to impose the tax in order to overcome the budget deficit – as well he might. The chief justice however had other views on the matter, leaving the government to wonder if the line between the law and governance may have become blurred. The CJ said that such decisions were not in accordance with good governance. He may well be right in a purely subjective sense and few would disagree with him. But was he right in terms of the strict interpretation and application of the law? We will have to wait until the 9th to get a definitive answer on this matter.