The power sector circular debt is set to cross Rs2.6 trillion by the end of the ongoing fiscal year i.e. FY2020-21. This is what Power Division’s Additional Secretary has told the National Assembly’s Stan¬ding Committee on Finance during a meeting last week. The crippling debt stood at Rs2.164 trillion as of June 30, 2020 and at Rs2.303 trillion as of December 31, 2020. This shows an addition of Rs436 billion during the ongoing fiscal year, of which Rs297 billion accounts for the second half.
The federal government had recently raised the power tariff by Rs1.95 per unit — in fulfillment of a condition for revival of the $6 billion IMF loan programme — expecting that the accumulation of the circular debt will slow down significantly. However, despite burdening the masses — especially the lifeline consumers for whom the Rs1.95 per unit raise in power tariff means electricity getting doubly expensive — the circular debt accumulation is not much different as the previous fiscal year (i.e. FY2019-20) had witnessed a Rs564 rise in this tricky debt.
Circular debt remains the biggest of the seven challenges facing the power sector in the country, according to study published late last year by Engro Energy Limited to identify problems in the power supply chain. If the study titled ‘Fixing Pakistan’s Power Sector’ is any reference, the circular debt will gallop to approximately Rs4.4 trillion by the year 2025.
On assuming power, the PTI government had vowed to plug this third-biggest fiscal hole in the economy through efficiency improvements. It had announced coming down hard on defaulters and power thieves to improve recovery of bills, besides putting the screws on authorities to curtail technical losses that remain far higher than the accepted limit. On the contrary, raising the power tariff appears to be the only trick available with the government’s financial wizards to deal with the monstrous debt.
The wrong lessons learned
Two years on from India’s Balakot misadventure and the humbling rebuke it received from Pakistan, the Indian Air Force has publicised the ‘lessons’ it learnt from the episode. In a report analysing various aspects of the events of February 26 and 27, 2019, the IAF once again seems to hide behind the supposed shortcomings of the hardware at its disposal. It claims that it would have been able to inflict ‘heavy damage’ on Pakistan if it possessed high levels of ‘technological asymmetry’.
There could be multiple justifications for the IAF’s public stance, the obvious one being that most services and institutions would loathe to admit their failings before their nations, even if they are internally well aware how badly they botched things up. At the same time, an episode like this one does provide a lever to pressure governments into clearing long held-up procurements, India’s much hyped Rafale purchase being just one case in point.
On the contrary, the notion does appear absurd in India’s case on the surface level. Does the IAF, with its fleet of Sukhois and its Israeli-made radar and air defence systems, not possess technological asymmetry already? Considering that the Pakistan Air Force delivered its strike response with half-a-century-old Mirages, that argument does not seem to hold much water.
There is another assessment for the way things panned out for India two years ago. More than a lack of technological asymmetry, the Indian military paid the price for an organisational and tactical failure. Even more importantly, India’s leadership, both civil and military, walked itself into a strategic miscalculation. That, rather than technological shortcomings, should have been the main lesson New Delhi drew from February 26-27. Unfortunately, the rhetoric that continues to emanate from across the border shows that this is not the case.
One hopes that wisdom will prevail at some point given the stakes attached to any tensions between India and Pakistan. A false sense of technological superiority — like the one Indian leaders are promoting again with their air force’s new French toys — is likely to lead to same strategic trap as before.
