Dawn Editorials 19th May 2023

Electricity concerns

A TOP power ministry official has cautioned that power supply to the residents of Karachi may face disruption if the government does not immediately pay outstanding tariff differential subsidy dues to K-Electric. That is quite disturbing. He informed the Public Accounts Committee during a briefing on Wednesday that KE consumers get Rs10-20 per unit in subsidy, which the government pays to the distribution company on behalf of its customers to keep their bills light. These are legitimate costs that distribution companies should be paid without delay in order to enable them to recover the full price of the electricity units they sell. KE’s nine-month report for July-March says that the increase in fuel prices and non-provision of local gas supply to it have resulted in a substantial jump in its TDS claim receivables from the government. The company’s net receivables from different government entities stand at Rs23.9bn on principal due basis after settling payables and receivables, a substantial portion of the latter being TDS.

The growing backlog of receivables means it will continue to have a significant impact on KE’s cash flow position, and affect its ability to increase the pace of investment in the power infrastructure as its net loss for the first nine months of the present fiscal year to March went up to Rs39.4bn. This compares with a profit of Rs1.5bn for the same period a year ago. The company’s losses don’t have anything to do with its receivables. That said, the timely release of subsidies is imperative for it to sustain its investments in infrastructure and to maintain fuel inventory and production. A committee set up by the government is trying to sort out the issue of receivables and, it is hoped, that a solution will be found by the end of next month. But the government is not justified in further delaying or stalling the outstanding TDS payments to KE where there is no dispute.

Published in Dawn, May 19th, 2023

Money talks

THE ‘one-percenters’ have reportedly stepped in to attempt to resolve the continuing impasse in the corridors of power. A fresh attempt is being made to jump-start negotiations between key stakeholders, this time led by some of the country’s most influential industrialists and tycoons.

The latter seem to be deeply concerned, and understandably so — there are significant investments at stake. With the economy imploding due to the government’s indecision and mismanagement, unceasing political instability, and seemingly untameable stagflation, the majority of business owners are having to reckon with severe to very severe threats to their profitability.

In many cases, even the continuity of entire enterprises is at stake. Against this backdrop, several influential representatives of the business community have been tasked with reaching out to various political stakeholders, seemingly to cajole them towards breaking the political deadlock.

It is unclear, however, what they may be able to offer the various stakeholders apart from some good sense, which, it must be said, has lately been in short supply. With each player in the game fighting for survival, none of the parties seems to have had the time to think about what is really in the national interest.

The PDM government’s failure to talk straight to the IMF and secure a desperately needed bailout package has made Pakistan’s polycrisis significantly worse. It would have been a very different picture had corrective measures to right the listing economy been taken in time.

An IMF programme revival now seems near impossible and the country faces an almost inevitable default. Pakistan has only managed to survive so far by massively curtailing imports, thereby choking a vast segment of the economy and significantly throttling growth.

A formal default could unleash further catastrophe. Therefore, while the effort to get political parties and the establishment back to the table is commendable, it is unlikely to yield fruit till each of them realises that what they are fighting over could quickly prove to be a poisoned prize.

None of the current players has the expertise to rule a broken economy, nor can they afford the political cost of doing so. The government, military and PTI leaderships have diverted too much of their mental faculties to fighting each other, letting the economic time bomb tick closer and closer to zero. It is time they snapped back to reality and defused it.

Published in Dawn, May 19th, 2023

Trade with Iran

FOR numerous reasons, mostly geopolitical, Pakistan’s volume of trade with its neighbours — with the exception of China — is very low. Trade ties with Iran have been particularly lukewarm, mostly due to the fear of attracting American and Saudi wrath. However, small steps are being taken to enhance the commercial relationship with Iran. Amongst these is the opening of the Mand-Pishin ‘border sustenance market’. The market, one of six such initiatives on the border of Balochistan and the Iranian province of Sistan-Baluchestan, was inaugurated by Prime Minister Shehbaz Sharif and Iranian President Ebrahim Raisi on Thursday to facilitate trade between the two countries. A 100MW transmission line that will bring electricity from Iran was also inaugurated. It is hoped these steps are followed up with more concrete efforts to deepen trade relations. The border markets will hopefully help promote much-needed economic activity in Balochistan, and should help formalise border trade. As it is Pakistani cities, particularly Karachi, Islamabad and Rawalpindi, are flooded with smuggled Iranian products. Formalising trade will help bring in tax revenue, while also opening up the Iranian market to Pakistani products.

Along with promoting trade ties, officials on both sides need to resolve the controversy over the Iran-Pakistan gas pipeline. While the Iranians have constructed the pipeline on their end, Pakistan has yet to build its part. As a result, Iran may take Pakistan to court, with this country facing a $18bn penalty for failing to complete the project. The matter was discussed in the Public Accounts Committee on Wednesday, with the PAC chairman remarking that “the US should pay the penalty” if it stops Pakistan from completing the pipeline, pointing to the widely held belief that the fear of offending Washington is preventing Pakistan from honouring its commitment.

Pakistan can ill afford to pay such a massive penalty. Reneging on the deal will reflect badly on our shaky international standing, and damage ties with Tehran. The state should make it a priority to address the pipeline issue, and assure Iran that it intends to honour the deal. If the price of gas is right, it would be a win-win situation for all, as Pakistan needs affordable hydrocarbons. The Saudis should have no concerns, as they themselves are mending fences with Iran, while our friends in Washington must be told that Pakistan has to honour the pipeline deal. If the US can look the other way when India and others buy oil from sanctioned Russia, it should have no issues if Pakistan buys gas from Iran, and enhances trade relations with it. Eurasian integration is the new buzzword, and if Pakistan fails to hop on the bandwagon of regional trade for fear of offending powerful actors, it will have only itself to blame.

Published in Dawn, May 19th, 2023

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