As Pakistan prepares to elect its 16thNational Assembly, major political parties continue to address electricity prices as a critical campaigning point to garner popular support. Pakistan Peoples Party and Jamaat-i-Islami are promising 300 free units of electricity to poor households; Pakistan Muslim League-Nawaz a 20 to 30 percent reduction in power bills and a significant increase in the generation capacity.

The idea of free electricity was first thrown up by the Istehkam-i-Pakistan Party, composed of seasoned ‘electables.’ But after negotiating an electoral alliance with the PML-N, it has not pursued the agenda.

Availability and affordability of electric power is a critical driver of socio-economic development and growth. The current economic environment has added to the pressure on the average citizen with mounting costs power bills. Slogans about reducing the cost of electricity sound nice but reflect poorly of the future legislators’ understanding of the energy sector.

Sustainability of utility tariffs is a fundamental concern in the energy sector. The importance of setting the right tariff structure cannot be overstated, as it impacts everything from the quality of service to environmental sustainability.

Following a recent survey, Pakistan Institute of Development Economics, a post-graduate research institute and a public policy think tank, concluded that manifestoes of major political parties had addressed less than 20 percent of Pakistan’s most pressing issues.

For the purpose of this survey, the PIDE had picked 18 key sectors, including local government, parliament, elections, cabinet, police, bureaucracy, budget making, debt management, PSDP, real estate, agriculture, energy, taxation, tariffs, trade, state-owned enterprises and internet services. On each indicator, a party could score a maximum of 100 points.

As per PIDE, the PPP scored zero on 17 indicators, the PTI on 13 and the PML-N on 12. Overall, the three major parties scored less than 20 percent, meaning that they have shared solid ideas about only 20 percent of the key economic and policy issues. This suggests that most manifestos lack substance on key issues.

The JI, for instance, continues to promise that it will end monopolies in the power sector distribution. The fact of the matter is that the NEPRA has already issued non-exclusive licences to key distribution companies, including K-Electric, which serves Karachi and its adjoining areas.

The national economy is on the verge of collapse due to the energy circular debt and other issues, such as a huge energy import bill. The political parties must stop talking about economic issues in a non-serious manner.

To be sustainable, power tariffs have to be high enough to cover the cost of generating, transmitting and distributing the grid electricity and the distribution companies have to have the funds needed to maintain and upgrade infrastructure and introduce new technologies. On the other hand, they must remain affordable for consumers.

The determination and regulation of tariffs is a complex processes, involving various stakeholders, including regulatory bodies, utility companies and consumer groups. The cost of generation varies greatly, depending on the type of fuel used. Renewable resources have the lowest running cost while high speed diesel, RLNG and Furnace Oil are more expensive. These also add to the import bill.

The sector is regulated by the government and the NEPRA.

Any party promising free or subsidised electricity will only be able to do so if a) it incurs significant debt to absorb the costs, which is unlikely in the current economic circumstances, or b) significantly expands the tax net to generate sufficient revenue. The latter will be a watershed development and should possibly be the bigger focus area to achieve an actual transformation.

The power sector circular debt is touching Rs 6 trillion. It is Rs 1.5 trillion more than the IMF forecast. Most of the amount is locked in capacity payments — fixed costs to pay to the power generation companies for setting up their plants.

Previous policy interventions have involved the imposition of a Power Holding Limited surcharge. Electricity customers across Pakistan saw an indefinite raise of up to Rs 3 in the cost of electricity to service the circular debt.

The consequences of unsustainable tariffs go further than this. For utility companies and power sector suppliers, insufficient tariffs add to their financial strain, ultimately inhibiting investment in infrastructure and technology vital for service quality and efficiency.

Deteriorating infrastructure affects service quality and makes the grid more vulnerable to faults and breakdowns. Millions of electricity units and subsequently billions of rupees are already being lost due to technical inefficiencies, transmission constraints and theft of electricity. Steps to address these core issues appear to be missing from the manifestos of those vowing a transformation through power subidies.

Exclusive licences in the power sector are gone. In theory, this opens the field for the entry of new players. This holds potential but requires thorough planning. In a regulated environment, distribution companies cannot make significant profits from the bills being paid by the customers. Instead, they generate profits by innovating and embedding efficiency in their operations.

A sustainable tariff, therefore, will need to consider several key principles. Foremost is to ensure efficiency both in consumption and distribution and support for environmental sustainability through incentives for renewable energy use. The role of regulatory bodies will be pivotal to ensure these principles are upheld.

Implementing sustainable tariffs can bring a multitude of benefits. For utility providers, it ensures financial stability and the capacity to invest in better infrastructure, which can stimulate growth and betterment. For consumers, it means reliable and high-quality services. Efficiency in electricity generation and distribution can also help lower the cost of electricity production, supporting the government by reducing the burden of capacity payments and also the subsidy requirement.

Since its inception, Pakistan has struggled to overcome the many challenges facing its electricity sector. Perhaps a large part of this was due to an ad-hoc approach to policymaking that prioritised immediate concerns over long-term viability.

At the heart of the matter is the question of sustainable tariffs. It is a critical factor that influences not just the economic health of utility providers and the affordability of services for consumers, but also the broader goals of environmental sustainability and energy efficiency. Achieving the right balance in tariff setting requires deeper thinking than promises of free electricity.

The writer is a staff reporter at The News. He tweets @Jawwadrizvi