This project addresses the following problems afflicting Pakistan’s electricity sector:
Circular debt and underinvestment: The biggest contributor to circular debt and under-investment in the electricity sector are subsidies for fuel and energy costs that are being provided to consumers. Subsidies have been built into energy pricing policy but consumers have also forced these upon the federal government because of the non-payment of utility bills.
Federal and provincial government contention: The federal and provincial governments are in dispute over how the National Finance Commission (NFC) award – which grants fiscal transfers from the federal government to the provinces for economic planning – should finance the electricity sector. Under the NFC award the federal government has accepted considerably lower revenue out of the federal divisible pool of tax revenues but the provinces are not under any contractual obligations to share in the subsidies in the electricity sector (among others) provided by the federal government. This raises the issue of federal-provincial jurisdiction in the area of electricity generation, transmission and distribution and the subsidy arrangements.
Governance structure: Since 1992, the electricity sector has gone through a number of reform attempts with limited success, leaving in its wake a poorly aligned system for governance. The decentralization of power to provincial governments in 2010 has further complicated issues.
Interprovincial Differences in Power Sector Subsidies and Implications for the National Finance Commission Award
Working Paper | Anjum Nasim and Umbreen Fatima | May 2014
Power sectors subsidies comprised 83 percent of the federal government’s total subsidies in 2012. Much of the government’s expenditure on subsidies is allotted to the tariff differential subsidy (TDS), which is provided to power distribution companies to cover the difference between tariffs approved by the National Electric Power Regulatory Authority (NEPRA) and those approved by the Ministry of Water and Power for all regions of the country. This paper outlines the electricity tariff determination process, reports on the TDS by consumer group and considers how tax revenue would be divided between the federal and provincial governments if provinces were able to generate revenue from the TDS. The paper finds that consumers are the highest recipients of the TDS and that it is allocated unequally among power distribution companies. It also shows that the TDS is transferred unequally between the four provinces, and is not consistent with the allocations specified in the 7th National Finance Commission award.
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“Who is Responsible?”
Column | Anjum Nasim and Reehana Raza | May 22, 2013
In an article for Pakistan Today, IDEAS Senior Fellow Anjum Nasim and former Director Reehana Raza correct claims made about the 1994 power policy by Sartaj Aziz, then a senior vice-president of Pakistan Muslim League-Nawaz (PML-N).
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