Trapped in a maze of cross-subsidies.

The Economic Coordination Committee (ECC) of the cabinet decided in a recent meeting to begin the process for the rationalisation of subsidies - a long-time demand of global lending agencies led by the International Monetary Fund (IMF).

The decision was based on a presentation made by Dr Waqar Masood Khan, who headed a Subsidy Cell in the Ministry of Finance before being elevated as special assistant to the prime minister on revenue. Dr Khan is reported to have estimated that the action plan proposed for the first phase of subsidy rationalisation plan covering energy, national food security and national savings could provide a benefit of Rs488 billion per annum.

The ECC led by Finance Minister Dr Abdul Hafeez Shaikh appreciated the plan and asked that ministries concerned should come up with proper summaries as required under the 1973 rules of business for approval and implementation of policy actions.

The biggest step in terms of financial impact pertains to the 'adoption of national average electricity tariff by consolidating the accounts of distribution companies (Discos), minimising electricity pricing slabs and subsidy to be distinctly identified on bills, which will save Rs200bn'.

There is no point in developing a competitive energy market if the accounts of poorly managed and efficient Discos are to be integrated to ensure a uniform tariff

For this, the Central Power Purchasing Agency (CPPA) or defunct Pakistan Electric Power Company (Pepco) would be directed to file a single tariff application to the National Electric Power Regulatory Authority (Nepra) based on consolidated accounts of all Discos. At present, all Discos file their separate tariff petitions and their separate tariffs are determined by Nepra. But then a uniform rate is applied to all Discos, including privatised K-Electric.

This would be done through the enforcement of Section 31(4) of Nepra Amendment Act 2017 that allows a uniform tariff for companies owned by a single owner - the federal government in this case. The government would then use surcharges as the weapon of choice.

This is practically anti-climax to the power sector reforms currently in progress. It is not only unfair to honest consumers but also counter-productive. The federal government and Nepra are already in the process of implementing Competitive Trading Bilateral Contract Market (CTBCM) that has to ultimately generate competition among market players to the benefit of consumers in terms of both...