It’ll take more than tariff hikes
The law of diminishing returns doesn’t reveal itself to our policy makers; it has to be drummed in by someone else. After the series of subsidy cuts and tariff hikes in the power sector, it is the IMF’s lot to tell the government that the strategy, important as it is, is one that could be carried on only so far. Other steps – the real work, is it were – like structural changes in the entire power sector cannot be avoided if the government wants to get out of the current power crisis.
To draw out an analogy to illustrate the ease of tinkering with the tariff as opposed to structural reform, consider the economy itself. Monetary policy, incredibly complex as the rationale behind changes might be, is as simple as pulling a lever when it comes down to implementation. Even in relatively deregulated monetary markets, the immense tools at the disposal of the government in the form of the SBP – both the national mint and the regulator of the banking sector – the government can see development very soon. On the other hand, on the fiscal and governmental spending front, making what economists call real changes requires something far more than a mere signing of a decision or two. It requires a huge and efficient bureaucracy and all of the other catalysts present in modern nation-states. It requires wading through not files alone but the great-outdoors of our complex socio-political space.
The same applies to the power sector. Changing the tariff design is something that is done when it is done. The consumers will simply have to fork out more and those pilfering it would be pilfering anyway. Changing the other variables – like plugging the leaks in the gird, figuring out what the relationships between the new, devolved GenCos and DisCos will be, recalibrating the relationships between the former and the oil marketing companies, finally putting an end to the circular debt issue – is the real grunt work. It is these that require far more effort and solid concentration than a mere announcement of tariff changes through the media.
