The long and short of it
The prime minister has decided to take a leaf out of the Raja Ashraf manual: giving a deadline which cannot and will not be met. This is not because the honourable PM is not to be taken for his word but because it is clear that the crises can only be solved in the long run and six months is not it.
But while the PM is serving up some appeasement for the public, the ECC is also preparing to serve a concoction of its own making. The committee presided over by the finance minister has approved of a price-hike in electricity tariffs (which Nepra is not on board with yet). This is to pay off the interest on the loan that it has taken to deal with the IPPs’ liabilities. What is being engineered is a ‘debt swap’ which will partially allay our circular debt demons and assist in restructuring the energy sector in the long run. But in the short run, this will amount to the consumer bailing out the government and the IPPs. But the short run is what the consumer cares about because, as they say, in the long run we’re all dead.
The fact that these problems are not widely understood – and that the media also compounds the confusion with its populist pandering – means that this step will also be seen as evidence of the government’s bad governance. While it is true that the incumbent dispensation’s lollygagging in the past four years has not helped matters, it cannot be denied that revising pricing strategies and phasing out unsustainable subsidies is the first step to deal with the crises.
The government really is in a bind here. The fiscal crunch that it is experiencing is debilitating. Its budget deficit is slated to rise to almost Rs 1.53 trillion (if it puts the sovereign guarantees that it has given for this debt swap on the books). If the government continues its spending binge (of which the subsidies in the energy sector are but an example), it also needs to generate the money. It can’t keep adding to its debt because it will hit the wall soon and there is no bailout on the cards. It can either raise taxes or tariffs – both at which the public balks. Or it can print money which means more inflation. Thus, the public pays no matter what.
Therefore, rationalising tariffs is a necessary evil the government has to deal with. These crises have been in the making a long time and there is no short-run palliative. The sectors have been mismanaged and it’s about time that a proper strategy was developed for the long haul.