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Ironically, public policy reversals in Pakistan never exact a price from the designers. The burden always falls on those who endure them – the powerless people. The latest example is the dilution of the net metering regime.
For years, citizens were encouraged to adopt a cleaner, more responsible energy transition by installing solar panels. Confronted with soaring electricity tariffs and relentless loadshedding, households invested billions in solar.
In a few years, Pakistan emerged as one of the world’s largest solar panel importers, importing up to 17 gigawatts in a single year. This is a people-led energy shift that few developing economies have achieved. The transformation was not through state largesse. It was financed by loans or investing meagre personal savings.
It has come as a massive blow to these people that buy-back rates are being reduced drastically and the contractual terms have been revisited. The cited justification is circular debt and grid stress.
Pakistan’s power sector circular debt had crossed Rs2.6 trillion. Projections warned of further escalation if there was no structural reform. We lose roughly $1 billion annually to theft and line losses. Consumers are charged Rs2.2 trillion annually in capacity payments for electricity that was never generated.
Generation capacity of roughly 46,000MW was contracted against a peak summer demand of about 30,000MW. This plunges to nearly 8,000MW in winter. These are not surprise elements. These glaring flaws and inefficiencies are structural, documented and longstanding.
It was ordinary citizens who reduced pressure on the grid by generating their own power and are now told that the fiscal math has reversed. This pattern is not new. In the 1980s, tax exemptions offered in industrial estates like the ones in Gadoon Amazai and Hattar were summarily withdrawn after billions had been invested.
In the 2000s, CNG was aggressively promoted as a cleaner and cheaper fuel alternative. OGRA issued 6,154 licences. Around 3,500 stations were established. Nearly three million vehicles were converted. Pakistan became one of the largest CNG vehicle markets in the world.
As gas shortages intensified, supply to CNG stations was curtailed and pricing formulas were revised upward. The investors were left with dormant assets and the consumers were forced back to petrol at far higher prices. The policy was championed when convenient and reversed when constraints surfaced. The financial burden was passed on to powerless consumers.
This is not to say that the state cannot honour its commitments. The dollar-indexed IPP capacity payments are backed by sovereign guarantees. They form a major component of circular debt extracted from the consumers.
These contracts are honoured with near-religious discipline because default risks include international arbitration, credit downgrades, reputational damage and financing constraints. The state fears ratings agencies, global capital markets and enforcement by international courts.
Domestic policy reversals carry no cost, political or otherwise. When committed regulatory frameworks are rewritten arbitrarily, there is no institutional recourse. Where retaliation is feared, commitments are protected. When it comes to the powerless people, they are reversed.
Repeated through decades, this paradigm is inherently a governance failure. Public education falters and private schools proliferate. Public hospitals strain and private healthcare expands. Security gaps for those who can afford are filled by private security. Nonexistent municipal water sees bore wells multiply. Humongous tariffs and an ever-faltering electric grid have led to solar panels rising atop rooftops.
The state proves itself incapable of reliable service delivery. It gleefully retains taxation authority and regulatory control. Pakistan is one of the most indirectly taxed countries in the world. Fiscal discipline here is most visible when arbitrary enforcement can be carried out at will without consequences.
When citizens compensate for the state’s systemic failure, they are praised as patriotic and resilient. When this lays bare legacy inefficiencies or disrupts revenue streams that are easy pickings for the state, they are penalised.
This compulsive urge to burden the people has to be curbed. Pakistan’s solar surge was, in essence, a green revolution. It should have been encouraged rather than being sanctioned.
We all understand that our fiscal space is limited and that reform is necessary. However, repeatedly targeting the compliant population while leaving structural leakages intact erodes whatever remains of the public trust.
Countries like India and Brazil, which faced similar problems in the energy sector, have done wonders by undertaking crucial reforms to curb losses and theft, rationalise subsidies, and eliminate distortive perks. They have also incorporated digital meters and AI analytics to plug the massive gaps. Projections show that if India replaces all its meters with smart meters, it will result in an additional cumulative revenue of $54 billion over the next few years.
Economic planning and health depend on predictability. Investment decisions are made on the basis of announced policy frameworks. When goalposts are shifted, capital flees to safer shores. As for the masses, they cannot hedge against policy volatility and have to absorb the losses.
Pakistan’s citizens have adapted repeatedly to shifting tariffs, fuel substitutions, subsidy withdrawals and grid failures. The question is not whether the people will readjust again; they always have to. It is whether the state will finally choose predictability over expediency, reform over reversal and structural repair over easy extraction.
If sovereign guarantees remain sacrosanct because their breach carries a cost, then domestic commitments must be treated at par because the cost of breaking faith with citizens is far greater. It is social erosion.
You cannot build investor confidence abroad while dismantling citizen trust at home. Resilience and adaptation should not be taxed because inefficiency and glaring structural failures remain no-go areas.
The knee-jerk urge to tax the sun is not fiscal reform; it is an admission of yet another governance failure. The people have done their part. It is time the system, for once, does its own.
The writer is a freelance contributor. He can be reached at: [email protected]
