First question: Why doesn’t the government reduce the electricity tariff by 50 percent? Our governments have long been selling us the most expensive electricity on the face of the planet (Pakistan 14 cents; China, India, Bangladesh and Vietnam 8 cents). Consider this: We are generating electricity from furnace oil. Over the past 12 months, the price of furnace oil in the international market has dropped by 70 percent. We are generating electricity from coal. Over the past 12 months, the price of coal in the international market has dropped by 50 percent. We are generating electricity from Liquified Natural Gas (LNG). Over the past 12 months, the price of LNGl in the international market has dropped by 76 percent.
The government claims that its ‘cost of service’ is 14 cents a unit or the equivalent of Rs22 a unit. The government claims that its ‘fixed charges’ are close to Rs7 a unit or 30 percent of the total. Why are our ‘fixed charges’ the highest in the world? How are China, India, Bangladesh and Vietnam able to maintain a tariff that is 40 percent lower than Pakistan’s? Imagine: our government also claims that ‘distribution and line losses’ are Rs7 a unit or 30 percent of the total. How can an entity function when 30 percent goes into ‘distribution and line losses’?
Second question: Why doesn’t the government reduce the price of petrol by 50 percent? In January 2020, the OPEC Basket Price stood at $64 a barrel. The current OPEC Basket Price hovers around $14 a barrel; a drop of 78 percent. The current OPEC Basket Price-which translates into Rs14 per liter of crude oil-is cheaper than bottled water that sells for Rs35 per liter.
If the current OPEC Basket Price is Rs14 per liter why is the price of petrol at Rs81.58 a liter at the pump? I understand there must be a refinery margin, dealers’ commission and Oil Marketing Companies’ profit but look at the gap-Rs14 per liter of crude oil versus Rs81.58 per liter for petrol at the pump. Something is terribly wrong somewhere.
Third question: Why doesn’t the government reduce the gas tariff by 50 percent? A year ago Brent Crude Oil was at $71 a barrel and we were paying $9.25 for a unit of LNG (13.37 percent of Brent). The current price of Brent is around $23 a barrel which would translate into $3 a unit of LNG; a drop of 68 percent (I understand there’s a 3-month average, S-curve mumbo jumbo but when the international price goes up we see an immediate impact on domestic prices).
To be certain, for the first time in the past 68 years Pakistan’s GDP is going to contract. That’s as serious as it gets. GDP contraction could mean ten million jobless and twenty million more below the poverty line. There’s a golden opportunity for the government to provide the economy with the best of stimulants – reduce the price of electricity, petrol, diesel and gas by 50 percent.
The writer is a columnist based in Islamabad.
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