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EAG’s New Vision for Economic Transformation

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EAG’s New Vision for Economic Transformation

Rethinking Resource Allocation and Productive Structures

This document is a collective contribution by the members of Economic Ad­visory Group, an independent group comprising individuals from academia, policy, and the private sector. An independent think tank Policy Research In­stitute of Market Economy (PRIME) has formed this group and serves as its secretariat.

The Economic Advisory Group is chaired by Syed Javed Hassan, a former investment banker and currently the chairman of NAVTTC and a regular writer on economic issues. Other members are: Dr. Aadil Nakhoda (Assistant Profes­sor, IBA Karachi), Dr. Ahmed Jamal Pirzada (Assistant Professor, University of Bristol, UK), Ali Salman, (Executive Director, PRIME), Muhammad Ashraf Khan (former Federal Secretary), Mueen Batlay (Director, Hamdard Institute of Man­agement Sciences), Najma Minhas (Managing Editor, Global Village Space), Samir Ahmed, (CEO, Knightsbridge Capital Group), Dr. Shazia Ghani (Team Lead, PM Special Initiatives Cell, in her personal capacity), Dr. Vaqar Ahmed, (Joint Executive Director, SDPI), Dr. Salamat Ali (Trade Economist, Common­wealth Secretariat), and Maheen Rahman (Chief Executive Officer at Infra Zamin Pakistan)

The EAG would like to especially thank Syed Javed Hassan and Dr. Ahmed Pir­zada for doing major part of writing in this document as well as extensive inputs provided by Ali Salman, Dr. Aadil Nakhoda, Dr. Vaqar Ahmed, Samir Ahmed and Mueen Batlay.

The group earlier submitted this document to the Planning Commission as a contribution to national economic debate on voluntary basis and is grateful to the office of the Chief Economist for providing this opportunity.

1st Pakistan Prosperity Forum 2021

by PRIME Institute PRIME Institute No Comments

1st Pakistan Prosperity Forum 2021

PRIME organized first Pakistan Prosperity Forum on 17th November 2021. We are proud that the celebrated economist, Dr. Arthur B. Laffer delivered a keynote address in the Forum. Dr. Arthur B. Laffer is the creator of “Laffer Curve” and has distinction in many publications as “The Father of Supply-Side Economics”.

Other speakers included Dr. Muhammad Ashfaq Ahmed, Dr. Ikram ul Haq, Huzaima Bukhari, Ali Salman, Dr. Nadeem ul Haque & Syed Javed Hassan.

Pakistan Prosperity Forum 2021

Marriott Hotel, Islamabad, 17th November 2021

AGENDA

9:30 amRegistration and Networking
FIRST SESSION
10:00 amWelcome Remarks by Ali Salman
10:10 amIntroductory Remarks by Rizwan Rawji
10:30 amKeynote Address by Dr. Arthur B. Laffer
11.15 amSpecial Remarks by Guest of Honour Shafqat Mahmood, Federal Minister for Education, Professional Training, National Heritage and Culture
11:30 am Questions & Answers with Dr. Arthur B. Laffer
12:15 pmLunch Break
SECOND SESSION
1:30 pmRebuilding the Revenue System Dr. Muhammad Ashfaq Ahmed, Chairman FBR
2:00 pmLow rate, flat, broad-based and predictable taxes Huzaima Bukhari, Dr. Ikram ul Haq and Ali Salman
2:45 pmDiscussion
3:15 pmConcluding Remarks by Dr. Nadeem-ul-Haque, Vice Chancellor PIDE
3:30 pmTea/Coffee Break
THIRD SESSION
4:00 pmRoad to a Prosperous Pakistan Syed Javed Hassan, Chairman Economic Advisory Group
4:30 pmVote of thanks Mohammed A. Rajpar, Member Board of Trustees PRIME  
4:45 pmConference Closes

An interview with Arthur B. Laffer (Business Recorder):

‘Pakistan needs broad-based, low rate, flat taxes’ Arthur Betz Laffer is an American economist

PRIME Profile Video:

Speakers Profile:

Pakistan’s tax structure needs drastic reform as a strategy for economic transformation and this conference is an opportunity to give impetus to choosing the right fiscal policy.

This lecture and conversation with Dr. Arthur B. Laffer is most pertinent to today’s Pakistan economic challenges. While he does not comment directly on Pakistan, one can deduce clear policy messages. With this, PRIME has done its most significant conference so far. We also arranged his meeting with the Prime Minister and Finance Minister where same messages were delivered.

Flat Tax Proposal by PRIME:

Javed Hassan Speech – Road to a Prosperous Pakistan:

FBR Chairman Presentation – Rebuilding the Revenue System:

Transcription of Dr. Arthur B. Laffer’s keynote:

keynote Address by Dr. Arthur B. Laffer:

You can watch the keynote address by Dr. Arthur B. Laffer delivered at Pakistan Prosperity Forum organized by PRIME here;

Dr. Arthur B. Laffer speaks at 1st Pakistan Prosperity Forum 2021

Full Conference:

You can also watch full conference at this link;

Laffer postulates: a way out of economic conundrum

by PRIME Institute PRIME Institute No Comments

Laffer postulates: a way out of economic conundrum

Ali Salman

Economist suggests low tax rates, spending curbs, free trade, selling bleeding SOEs

to meet another imf condition the federal cabinet approved state owned enterprises soe bill to revamp the existing management structures of these enterprises photo file
To meet another IMF condition, the federal cabinet approved State-Owned Enterprises (SOE) Bill to revamp the existing management structures of these enterprises. PHOTO: FILE

ISLAMABAD: Arthur Laffer’s name is no stranger to economics. Known as creator of the “Laffer Curve” and the “Father of Supply-Side Economics”, the maestro was in Islamabad recently.

During his keynote address at the Pakistan Prosperity Forum, Laffer outlined six pillars of prosperity: low rate and broad-based flat taxes, spending restraints, sound money, reduce excessive regulations, promote free trade, and privatise the bleeding state-owned enterprises (SOEs).

An additional postulate in this presentation was redefining building codes, which impede economic activities in urban centres. In this article, we present his main postulates and briefly relate them with Pakistan’s situation.

Taxes used as a tool for expanding government services create hurdles in the way of businesses and put extra burden on the people. The purpv ose of tax is to discourage bad behaviour like curbing smoking by imposing taxes.

He said, “When we tax income, then earning more becomes less attractive, and economic activity declines.”

Higher number and rates of taxes have contributed to lower compliance and surging evasion in the country. Currently, 7.1 million people are registered with the Federal Board of Revenue (FBR) and only 3.1 million are filing annual tax returns while 4 million are evading taxes and the FBR is lacking capacity to bring those to the tax net. This manifests flaws in our contemporary taxation system.

Although there has been some improvement in tax collection, yet it has not contributed to significant changes in the underlying tax structure.

Laffer believes “the size of governments is increasing in the world and taxes are imposed to finance those expenses. Pakistan with low per capita income should not be spending more as government expenditures by generating revenues through taxes”.

The sugar industry of the country manifests inefficiencies emanating from excessive state regulations. From the crop sowing area to wholesale and retail prices, everything is determined by the government through administrative bodies at federal and provincial levels.

Yet, the price of the commodity increased sharply by 127% in the last three years from Rs55 per kg in December 2018 to Rs125 per kg in October 2021. This calls for the reduction in regulations and moving towards free market.

The total debt accumulated by SOEs amounts to Rs1.97 trillion. When annual losses of SOEs and tax exemptions are included, we will see a significant amount.

In addition, despite the closure of Pakistan Steel Mills in 2015, Pakistani taxpayers spent Rs55 billion over the last five and a half years on salaries of 9,350 workers, many of whom reportedly secured other employment during the period.

The government needs to move away from businesses and proceed with privatisation to make resources available for development. Private sector is better equipped to bring necessary capital to make these enterprises operational and promote their efficiency.

The domestic currency has seen significant devaluation in recent years on the back of unsatisfactory economic performance. Pakistan has not sound money, which creates uncertainty in the business environment.

Laffer said, “There is nothing that can bring your economy to its knees quicker than unsound paper money.”

It is pertinent for growth and prosperity to have a stable currency, which will only happen when businesses prosper and economy activity reaches its potential.

The country is suffering from low productivity and lack of innovation as a result of high trade barriers.

Laffer said, “There are some things we make better than foreigners and there are some things foreigners make better than we do. We and they would be foolish if we don’t sell them those products we make more efficiently than they do and they sell us those products they make more efficiently than we do. It’s a win win. Trade is critical not only to the economy but to prosperity, and it’s also critical to peace on earth.”

It is imperative to review our policies for the promotion of trade, which will only happen when we reduce tariffs and minimise regulatory barriers.

The economic policies of Pakistan should focus on promotion of these pillars to reach our potential. While many economists are saying these Lafferian ideas do not apply anymore, we see their understanding is needed more given where Pakistan’s economy is.

There is no harm in paying heed to one of the most influential economists of the 20th century for a country where economists are mostly busy telling a 19th century state tools for revenue extraction. Let markets work and let fountain heads of prosperity explode. Finally, while people may support free markets in general, when it comes to implementation, they usually try to procrastinate. In Laffer’s view, “Free markets are most needed when you’re in trouble because they are the way out of trouble.”

The writers are affiliated with PRIME, an independent think tank based in Islamabad

Published in The Express Tribune, November 22nd, 2021.

Customs Tariff Reforms: One Step Forward, Two Steps Back

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Customs Tariff Reforms remain lackluster to augment country’s exports

PRIME’s new report, “Customs Tariff Reforms: one step forward, two steps back” finds that country is lagging to diversify its produce, markets and our domestic industries remained inefficient on the back of insignificant tariff reforms. Pakistan Tehreek-e-Insaf (PTI) government came to power with the reformative agenda to augment industrialization and exports of the country but “Make in Pakistan” remained a slogan because contemporary tariff structure restricts innovation and efficiency.

“Customs Tariffs are often used as a tool for protection of domestic industries and revenue maximization. Effectively, they work against domestic industry by shielding them from innovation and competitiveness. While the government may compensate for its revenue targets from import taxation, it stunts economic growth, and hence future revenues”, said Ali Salman, Executive Director PRIME

Government took a policy change in 2019 by assigning responsibility of customs tariff determination to Ministry of Commerce by establishing tariff policy board and tariff policy center in National Tariff Commission (NTC) to put forth proposals on the back of research and consultation with stakeholders. Subsequently, National Tariff Policy 2019-24 was formulated and customs duty on raw materials were slashed for some sectors. However, the impact remained insignificant from the raise in regulatory duties by Federal Board of Revenue (FBR).

The report highlights that imports in country are subjected to myriad duties for protection of domestic industries from international competition and revenue generation to manage budgetary requirements. In trade policy, revenue generation has taken precedence over long-term sustainability and industrial competitiveness, which can be illustrated by the fact that revenue collection at the import stage has stood above 40% of the total FBR collection, i.e. Rs 2,129 billion was collected at the import stage out of total FBR’s collection of Rs 4,732 billion in FY21.

Contemporary tariff setting is based on a principle of cascading i.e. tariffs on raw materials are low, on intermediate and final goods are high. Resultantly, consumers have to buy domestically produced low quality products at high prices and local firms do not innovate to become competitive internationally because of their focus on domestic sales. Therefore, import substitution policy actually becomes export substitution policy.

Moreover, the government has promulgated 43 SROs in the last three years while the PML-N government had promulgated 53 SROs in five years, which created uncertainty and difficulty in the implementation of tariff policy along with making the system more complex.

The report highlights that PTI government has managed to sign China Pakistan Free Trade Agreement phase II but progress on other bilateral and multilateral trade agreements with Asian tigers, Central Asian States, and decision on joining Regional Comprehensive Economic Partnership (RCEP) has been lagging, which has restricted exports to conventional destinations

It has been globally acknowledged that higher the number and amount of taxes, higher will be the tax avoidance. Similarly, high tariffs have contributed to under-invoicing, mis-declaration of quality and quantity of goods and more importantly smuggling, which is a signal that tariffs are priced too high for customers.

Report suggests that country’s trade policy needs reforms such as formulation of comprehensive trade policy, tariff restructuring, rescinding import substitution policy and moving away from using tariffs as revenue generation tool to augment competitiveness of domestic industries and exports of the country.

Click below to read full report:

For inquiries, please contact afzal@primeinstitute.org or call at 03330588885.

Tariffs reforms: one step forward, two steps back?

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Tariffs reforms: one step forward, two steps back?

Ali Salman | Tuaha Adil

Country has failed to diversify its produce as tariff structure restricts innovation, efficiency

the think tank noted that the pti government has laid the ground for tariff policy but trade figures are not showing promising results photo file
The think tank noted that the PTI government has laid the ground for tariff policy. But trade figures are not showing promising results. PHOTO: FILE

ISLAMABAD:

Three years have passed since the Pakistan Tehreek-e-Insaf (PTI) government came to power with the agenda of reforms to remove structural inefficiencies in the economy and put the country on a growth trajectory.

Strengthening trade, revitalising industries and boosting exports are part of PTI manifesto.

Customs tariffs, if effectively employed (or perhaps not used at all), can help in import of innovation, leading to economic growth, whereas their regressive use could erode competitiveness, cause de-industrialisation and push down exports. Clearly, Pakistan’s is a case of latter.

“Make in Pakistan” has been used as a slogan both by businesses and government agencies to gain support and promulgate policies, but the country has failed to diversify its produce because the contemporary tariff structure restricts innovation and efficiency. There is correlation between imports and exports, as the former comprises necessary inputs that will be morphed into value-added commodities for domestic and foreign consumption. But the country is following an import substitution policy, which restricts productive activities, hinders adoption of modern technology, limits competitiveness of domestic industries and creates anti-export bias.

Import substitution is an idea from the 1960s playbook, which has long been shelved, especially in Asian economies, which were later called Asian tigers.

The heart of import substitution-based industrialisation lies in levying protectionist duties and other associated tariff and non-tariff measures. They exponentially increase the value of imports, translate into higher cost of production and deprive manufacturers of necessary capital.

They also diminish the competitiveness of commodities internationally and cause inflation domestically. As a result, Pakistan is in the list of countries having high tariff and non-tariff barriers to trade and its weighted average tariff stood at 12.1%. In contrast, the weighted average tariff of China, Indonesia, Malaysia and even Sri Lanka is 7.5%, 8.1%, 5.7% and 9.3% respectively. Imposition of additional customs duties and regulatory duties makes the gap even wider. In November 2019, a major policy change took place in the form of entrusting the Ministry of Commerce, instead of the Federal Board of Revenue (FBR), the task to determine tariffs. Therefore, a tariff policy board was constituted and the Tariff Policy Centre was established in the National Tariff Commission (NTC) for assistance.

Although NTC was assigned the task to carry out research and formulate proposals in consultation with stakeholders, the Ministry of Finance still played a leading role in the determination of regulatory and other duties imposed during the year.

The PTI government can be credited with the formulation of country’s first National Tariff Policy (NTP), yet implementation of the policy remains to be seen in true sense.

Customs duty on raw material was slashed but on intermediate and final goods it remained unchanged while additional customs duty and regulatory duties were increased, thus making the overall impact insignificant.

The reason behind the myriad duties is the protection of domestic industries from international competition and revenue generation to manage budgetary requirements.

In the framing of country’s trade policy, revenue generation has taken precedence over long-term sustainability and industrial competitiveness, which can be illustrated by the fact that revenue collection at the import stage has stood above 40% of the total FBR collection, ie Rs2,129 billion was collected at the import stage out of total FBR’s collection of Rs4,732 billion in FY21.

On the other hand, continuous provision of protection to industries without realisation of their potential to become internationally competitive has eliminated the incentive to innovate, thereby making them crippled and in need of government support. Subsequently, the transfer of knowledge and technology associated with trade did not happen in the case of Pakistan. NTP envisages reducing complexity in the entire tariff system, but items are frequently moved from one schedule to another through which application of duties remains consistent along with time to time promulgation of SROs, which negates the purpose of creating different tariff slabs, and the implementation has become more intricate.

Moreover, the government has promulgated 43 SROs in the last three years while the PML-N government had promulgated 53 SROs in five years, which created uncertainty and difficulty in the implementation of tariff policy along with making the system more complex.

The application of multiple duties and complexity of the system makes the implementation of policies difficult and leads to the emergence of distortions. It has been globally acknowledged that higher the number and amount of taxes, higher will be the tax avoidance. Similarly, high tariffs have contributed to under-invoicing, mis-declaration of quality and quantity of goods and more importantly smuggling, which is a signal that tariffs are priced too high for customers.

Pakistan’s complex and progressive tariff policy contributes to stagnant exports and requires revision. There are several recommendations:

First, the tariff structure needs simplification through reduction in the number and rates of tariffs. Second, the country needs a comprehensive long-term trade policy to create certainty and provide a road map to businesses, and move away from distortion-creating SROs.

Third, imports translate into exports, therefore, import substitution policy should be rescinded.

Four, tariffs should not be used as a revenue generation tool. Lastly, the protection provided to inefficient industries should be ended to incentivise innovation and adoption of modern technology for higher production and exports.

The writers are affiliated with PRIME, an independent economic policy think tank based in Islamabad

Published in The Express Tribune, October 25th, 2021.

Economic Freedom of the World 2021

by PRIME Institute PRIME Institute No Comments

Economic Freedom of the World 2021

Pakistan scores low in world economic freedom report 2021
Pakistan on a downward trajectory in economic freedom

Islamabad, Pakistan—In the Fraser Institute’s annual Economic Freedom of the World report 2021, Pakistan scored 5.95 out of 10 in terms of economic freedom and lie in bottom quartile, an illustration that country is not economically free.

In this year’s report, Pakistan ranks 142nd  based on 2019 data, the most recent comprehensive data, part of a downward trend since 2016. (Last year, Pakistan ranked 133rd with a score of 6.07.

“Due to higher taxes and increased regulation in Pakistan, people are less economically free, which means slower economic growth and less investment in the country,” said Fred McMahon, Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute.

“Pakistan is not economically free. This is not a secret. There is a possible relationship between our economic constraints with the restrictions we impose on our individuals and enterprises. Fraser’s report points to some of these restrictions” said Ali Salman, Executive Director PRIME.

The report, which was first launched in 1996, measures economic freedom—the ability of individuals to make their own economic decisions—by analyzing the policies and institutions of 165 countries and territories. Indicators include regulation, freedom to trade internationally, size of government, property rights, government spending and taxation.

People living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer lives.

For example, countries in the top quartile of economic freedom had an average per- capita GDP of US$50,619 in 2019, compared to US$5,911 for bottom quartile countries, and US$1,284 for Pakistan. And poverty rates are lower. In the top quartile, 0.9 percent of the population experienced extreme poverty (US$1.90 a day) compared to 34.1 percent in the lowest quartile.

Finally, life expectancy is 81.1 years in the top quartile of countries compared to 65.9 years in the bottom quartile, and 67 years in Pakistan.

Pakistan achieved physical security by investing in nuclear capability. We need economic security by investing in our people and institutions and by disinvesting the state from areas where it is not needed. This is the essence of economic freedom.

The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 countries and territories, including PRIME Institute in Pakistan. It’s the world’s premier measurement of economic freedom.

Click below to download full report:

MEDIA CONTACT:

Afzal Khan; afzal@primeinstitute.org or call at 03330588885

Free electricity distribution by state

by PRIME Institute PRIME Institute No Comments

Free electricity distribution by state

Ali Salman | Tuaha Adil

Subsidy policy revision, technological solutions can address inefficiencies in power sector

photo reuters

ISLAMABAD: According to a recent report released by PRIME, state-owned electricity distribution companies (DISCOs) have caused a cumulative loss of Rs1,355 billion over the last five years.

This includes the loss due to failure in bill recoveries (Rs495 billion), financial loss due to transmission and distribution loss (Rs195 billion), and tariff differential subsidy (Rs708 billion) over 2016-2020.

This should not be surprising given the inefficiencies with which the distribution component of the power sector is marred with.

It has a direct bearing on under-utilisation of the electricity surplus capacity, which in turn has led to the ever-increasing circular debt and rising electricity tariffs.

Failure on the part of successive governments to take tough decisions has landed the country into this quagmire.

As the report shows, the performance of state-owned DISCOs remains unsatisfactory as they have not met National Electric Power Regulatory Authority’s (Nepra) targets for transmission and distribution (T&D) losses, bill recovery, investment and public safety.

The ultimate burden of the inefficiencies is put on the consumers. The higher cost of electricity and power outages has disrupted economic activities in the country, increased the operational cost of businesses, contributed to sluggish growth in gross domestic product (GDP), and led to a decline in the competitiveness of local industries.

In terms of T&D performance, DISCOs are found to be slightly in breach of Nepra targets, therefore, their five-year accumulated losses reached Rs195 billion.

To keep DISCOs operational, governments are forced to regularly pour in money to bail out the defaulting distribution firms in the form of tariff differential subsidy.

Public safety is a cardinal component of power sector efficiency, but DISCOs’ performance is lacking with total fatal accidents mounting to 680 in five years.

FY21 saw an increase in cases of electrocutions where 185 people lost their lives. The incidence of fatal accidents is contingent upon a number of factors such as the condition of infrastructure, population density, encroachments and planning of cities.

Although there is surplus generation capacity in the country, there is still prevalence of power outages, which manifests inefficiency. DISCOs have shown improvement in curtailing T&D losses while the performance of some companies has deteriorated as per latest Nepra report released a few days ago.

Consumers face average daily load-shedding of more than two hours in jurisdictions of various DISCOs. The indiscriminate power outages in loss-making regions are compelling the compliant citizens to look for alternative sources of uninterruptable electricity, therefore, DISCOs are drawing less power from the allocated quota.

This is further exacerbating the problem of surplus generation capacity and subsequently, the burden will fall on the narrow consumer base in the “take or pay” regime.

There are over 1.2 million pending electricity connections, which suggests a significant level of unmet demand. Delays in the provision of electricity connection put the burden of capacity payments on the narrow consumer base and prompt the government to raise tariffs.

As K-Electric example suggests, once incentives are realigned, it can be hoped that the private sector will start investing in the T&D sector.

Total investment made by K-Electric after privatisation has been $3 billion, including Rs68 billion between 2016 and 2020. It has also received a subsidy of Rs143 billion in five years.

Its financial loss from unrecovered bills and T&D losses is calculated at Rs134 billion in five years.

To promote consumer compliance in the lower-tier income groups, the company started a programme in which people could pay bills in installments.

It removed 200,000 Kundas (illegal electricity connections) in 2020 alone to curb power theft. It indicates that despite all shortcomings, K-Electric privatisation has been an overall success story.

Reforms

The government needs to move away from the business-as-usual strategy and temporary fixes, as they threaten the sustainability of power sector. Therefore, a sustainable framework is needed for power sector reforms starting with restructuring and privatisation, either partial or segment-wise, and adoption of competitive tariffs.

The policy of subsidy allocation needs a revision to create incentives for DISCOs to innovate and improve. Besides the policy, technological solutions are also needed like GIS mapping, automated meter reading (AMR), energy audit and accounting, and prepaid metering system, which are the technical solutions to the power sector issues.

As recent news suggests, the distribution firms have admitted sending inflated bills to consumers. A private sector entity free from political power but under a watchful regulator cannot do it.

It is high time that T&D segments are freed from state clutches after strengthening energy regulators at all levels. An efficient and transparent market of electricity generation and distribution is what customers need.

This will also help the government to directly support lifeline consumers instead of distributing the cost of inefficiency across the board.

The writers are affiliated with PRIME, an independent think tank based in Islamabad

Published in The Express Tribune, October 4th, 2021.

State owned Electricity Distribution Companies: A Performance Review

by PRIME Institute PRIME Institute No Comments

State owned Electricity Distribution Companies: A Performance Review

Electricity Distribution Companies’ losses mounts to Rs.1355 billion

PRIME’s new report, “STATE OWNED ELECTRICITY DISTRIBUTION COMPANIES: A PERFORMANCE REVIEW” finds unsatisfactory performance of state-owned power sector distribution companies and recommended policy reforms. The distribution companies are continuously accumulating losses, which amounts to Rs.1355 billion in five years (2016-2020). The report highlights the underlying reason of inefficiencies such as delay in the structural reforms and continuous bailouts by government, which eliminates the need of improvement.

From 2016-2020, the report highlights that the distribution companies accumulated the loss of Rs. 452 billion in terms of inability to recover billed amount, while loss of Rs. 195 billion was accrued due to outdated transmission and distribution infrastructure.  The underlying reason for T&D losses remains lack of adequate investment on behalf of some distribution companies while some invested more than the allowed limit. The distribution companies were also found to be in breach of NEPRA targets, and for which small penalties were also imposed but there is still prevalence of defiance. Therefore, government has to bailout distribution companies every year to keep them afloat, which costed Rs. 708.4 billion in the stated period.

Despite the surplus generation capacity in the country, there is still prevalence of power outages and consumers faced average daily load-shedding of more than two hours in some regions. Consumers also faced disruption in services for which complaints were registered and some distribution companies received large complaints thus depicting low consumer satisfaction.

Public safety is an important component of the performance evaluation and incidence of 680 fatal accidents in five years display a grim picture and non-compliance of safety protocols. Furthermore, NEPRA also appears unable to ensure the implementation of safety protocols.

The report displays delays in the provision of new utility connections to the public depending upon the size of population. Total pending connections stood at 1.2 million in five years. These delays can be attributed to underutilization of surplus generation capacity.

The report recommends that government should undertake policy and technical reforms for higher efficiency of the sector. Therefore, a sustainable framework is needed for power sector reforms starting with complete or segment wise privatization of state owned entities, review of tariff regime to reflect costs and better implementation of policies through more empowered and resourceful NEPRA. Besides policy reforms, attention is also needed towards up-gradation of entire distribution infrastructure to curb losses.

Click Below to read full report:

For inquiries, please contact afzal@primeinstitute.org or call at 03330588885.