Machiavelli once advocated that cruelty should be administered in one swift blow. Eschewing that advice, the government has apparently decided that power tariff rates will be raised in steady doses of two percent in the next two months and possibly extending the plan to more months. But whether the tariff is ramped up in dollops or a single wallop, it is unlikely that it will improve the energy outlook.
As another blistering summer sets in with power cuts overcoming a broken energy sector, the government is growing increasingly desperate over how to tackle the ubiquitous circular debt of over Rs 300 billion. In addition, audit reports conducted by reputed firms have painted a damning picture of gross incompetence in energy companies. Reportedly, incidents of overcharging customers are rife, default of around Rs 80 billion is reported and a potential generation loss stands at a staggering 1,500 MW.
The real problem at hand is the unsustainable energy mix with thermal power (almost exclusively based on oil) meeting above 60 percent of the generation requirement. It is doubtful that this unhealthy dependence can be maintained given the upward trajectory of oil prices. Furthermore, with such high costs, the final consumer will continue to face prohibitively expensive power charges. Another very genuine issue is energy subsidies to consumers which the financially beleaguered government, badgered by the IMF, finds increasingly difficult to support. But it is already formally committed to ending subsidies which must be phased out gradually to improve the overall performance of the energy sector.
This would constitute a challenge to the most able of governments, much less a weakened administration overwhelmed by a plethora of challenges. This is perhaps the worse time for populism on the part of the opposition but the government must show something for the resources being ham-fistedly committed. It must display resolve in overhauling the sector and bolstering conservation efforts and move beyond rhetoric.