Dealing With Defaulters in Pakistan

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An activist holds a light bulb in her mouth during a rally in Lahore, against widespread electricity shortages in the country. AFP file.
An activist holds a light bulb in her mouth during a rally in Lahore, against widespread electricity shortages in the country. AFP file.

Unpaid bills owed to state-run power companies in Pakistan are a national scandal. The defaulted amount is now estimated to be close to Rs500 billion

DR MALEEHA LODHI

[dropcap]A[/dropcap]ny action against defaulters should be welcome in a country where runaway budget deficits have been fueled by non-payment of taxes and by mounting losses of state enterprises, including power distribution companies, owing, partly, to non-payment of utility bills.

But if this policy measure is executed in a way that mires it in contention and controversy, rather than galvanize support, this can be self-defeating and make much-needed reform steps harder to enforce in the future. This is what seems to be happening to the government crackdown on defaulters of electricity bills.

Surprisingly, the government didn’t act on this earlier, especially in winter, when the risk was much lower of such action conflating with prolonged power cuts to provoke wider resistance. Instead, it chose to direct state-run power distribution companies to take this initiative at a time of unprecedented power outages across the country, when both the temperature and public anger have been rising.

Putting even the most well-intentioned policy measure into practice is a challenge, which calls for a well-thought-out approach, and the right message and messenger to convey this to build public support. Action against power defaulters required careful preparation, prior and effective public explanation and crucially, forging a provincial consensus.

But none of these conditions were met for a step deemed necessary by the fact that billions of rupees in unpaid bills must be collected as a key element of any comprehensive power sector reform if the country’s crippling energy crisis is ever to be resolved.

Last year the government ‘cleared’ Rs480 billion of the power sector’s circular debt by resort to more borrowing. But it knew only too well that this would again accumulate unless the flow of debt was addressed – by tackling unpaid bills, electricity theft and inefficiency and corruption in the public sector, among other things.

With the minister for water and power, Khwaja Asif, now acknowledging that circular debt has again risen because of “slow recoveries” and power theft, an “aggressive campaign” against such “pilferage” was warranted.

This campaign, he claimed, had already yielded around Rs3.2 billion from defaulters, mostly government departments. But minister of state, Abid Sher Ali, announced that the aim is to collect Rs33 billion from defaulters by May 30, this year – an impossible target.

Unpaid bills owed to state-run power companies are a national scandal. The defaulted amount is now estimated to be close to Rs500 billion. Almost three fourths of this is owed by the private sector. Government departments and provinces owe the rest. The four provinces, Fata and Azad Kashmir together owe around Rsl00 billion. Among provinces, the Sindh government tops the list (at Rs56 billion) followed by AJK, Fata, KP, Balochistan, federal government departments and Punjab, in that order.

To deal with this grim situation and anticipating a long summer of mounting electricity outages, the government needed to first involve the provinces in evolving a common strategy for the recovery of unpaid bills.

This meant calling a meeting of the Council of Common Interests or assembling provincial representatives in another forum to discuss how to proceed. A meeting was also necessary of the two-member committee established last year by the CCI to resolve the centre’s differences with provinces over defaulted amounts attributed to them.

A well-crafted public announcement before launching the campaign would have been important to create a conducive environment. The recovery campaign needed to incorporate an approach aimed to turn non-payers into regular customers by a mix of incentives and disincentives and not just the use of force.

It should also have been accompanied by other reform measures to make power distribution companies efficient and accountable, and ensure elimination of ‘technical’ line losses not attributable to theft.

Instead of meeting any of these conditions, the high drama and publicity surrounding the (temporary) suspension of power supply to Parliament House, the Presidency and the Prime Minister’s office suggested there was more showmanship than seriousness about securing long-term results.

The sudden manner in which the campaign was launched created an impression that it was a one-time effort rather than part of sustained policy. That no visible action was taken against any of the private sector’s big defaulters also detracted from the seriousness of the effort.

To explain the campaign once it was underway, the government decided to field a junior minister, not known for his sobriety, whose inflammatory language against provincial defaulters only made matters worse.

The result was predictable. The Sindh government lashed out, condemning the campaign as discriminatory, and warning power distribution companies that their employees would be arrested for their “illegal and unconstitutional action” if they disconnected power supply “to entire villages” for the “unpaid dues of a few consumers”.

Sindh’s assembly unanimously passed a resolution assailing the federal water and power department for “discriminating against Sindh”. The chief minister declared that his government was ready to pay its electricity dues, but only after federal power authorities and their provincial counterparts were able to agree on the accurate “calculation of bills” – a reference to the dispute over the billed amount that the CCI committee was supposed to settle. But the committee never convened, as it should have before power connections were disconnected for non-payment. Sindh’s chief minister also urged the prime minister to immediately call a CCI meeting

An even more bitter row was kicked up in Khyber Pakhtunkhwa when Abid Sher Ali accused ministers in the KP government of shielding power thieves to protect their political bases.

This, and the action to suspend power supply to parts of KP, triggered accusations by the Pakistan Tehreek-e-Insaf-led government that it was being deliberately targeted and that disabling feeders, which supplied power to large areas but had low repayment rates, unfairly penalized dues-paying citizens residing there.

All this could have been avoided if the federal government had adopted a consensual approach rather than undertake this action unilaterally. The PML-N government had started its tenure by reaching out to provincial governments, referring, for example, its draft energy policy for approval to the CCI. Getting a provincial buy-in was seen as essential to implementation of the energy strategy.

But the center’s provincial consensus building effort sagged in recent months, if not petered out, prompting complaints from smaller provinces that they were being kept in the dark about key economic and security policy measures.

In fact, the country’s present configuration of political power necessitates evolving a firm provincial consensus to enforce any policy or reform measure. Both the regionalization of politics, indicated by last year’s election, and the constitutional devolution of power to provinces means that Pakistan cannot be governed in the old way or by unilateral fiat.

While the PML-N government has the power to initiate reform actions, their implementation requires all provinces to be on board. This should urge the government to move proactively to forge an interprovincial consensus before proceeding with policy steps. Without this, measures will not stick. And they will stall in the face of political controversy and resistance – as action against utility bill defaulters has demonstrated.

Building provincial consensus is now a governance imperative and not just a desirable political goal. It is a complex challenge in a more politically polarized federal polity, but one that nonetheless has to be met if policy is to be properly executed.

Everyone agrees with the principle of penalizing ‘power thieves’ and defaulters to deter non-payment of bills in the future. But action to secure this objective must be carefully framed, have provincial support, and be enforced on a sustainable basis and not in isolation from other equally important steps to fix the power sector.

Action without provincial ownership and therefore trust in its non-discriminatory execution is a recipe for contention that can doom measures to irrelevance. It also risks becoming an example of how not to reform.–Courtesy The News

All opinions and views expressed in columns and blogs are those of individual writers and do not necessarily reflect the editorial policy of Caravan

theclarionindia
theclarionindiahttps://clarionindia.net
Clarion India - News, Views and Insights about Indian Muslims, Dalits, Minorities, Women and Other Marginalised and Dispossessed Communities.

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