Islamabad, April 7. Poverty in Pakistan is structural and not cyclical; the tariffs paid by the country's people today are not the price of electricity, but rather the recovery of past multi-billion dollar policy errors, a report highlights.
According to Pakistan's Ministry of Planning, Development and Special Initiatives, around 50 million Pakistanis were living below the poverty line in 2018. By 2024, the number had increased to roughly 70 million.
"In 2018, the average electricity tariff was around Rs 11 per unit. Today, households are paying around Rs 50 per unit. This is not an adjustment. This is a structural shock. When electricity becomes four times more expensive – food becomes expensive, real wages fall, manufacturing contracts and small shops shut. This is how a tariff becomes structural poverty," a report in 'Pakistan Observer' mentioned.
In Pakistan, the power tariff has led to five consequences - it has repriced survival, turned utility into a liability, converted light into a monthly negotiation with hunger, determines what is eaten, what is delayed and what is abandoned and shifted the burden from balance sheets to dinner plates.
The government's policy decides what people eat. Protein is the adjustment variable when the bill rises from Pakistani Rupees (PKR) 6000 to PKR 22,000. People cook lentils instead of chicken, milk is diluted and fruits are consumed less since the electricity bill is fixed while the nutrition is flexible.
The report stated that government policy also determines what is postponed as school fees are delayed, doctor's visit is deferred and a broken ceiling fan remains broken. Government police also decides what is abandoned. A child stops going to school after receiving two reminders from school regarding fees. School is surrendered and it is replaced with income. The same child who used to go to school for studying now carries tools to a workshop or works at a tea stall. Childhood becomes the shock absorber when police increases fixed costs faster than incomes.
"Food must adjust. Education must adjust. Health must adjust. And that is how tariff becomes structural poverty. In 1995, Roush (Pakistan) Power Limited (RPPL) signed a Power Purchase Agreement with WAPDA. The project cost $560 million. Today, the generation cost stands at Rs745.05 per kWh," the report in Pakistan Observer mentioned.
"In 2017, the China Power Hub Coal Power Project was established at a cost of $1.995 billion. Its generation cost is Rs 349.92 per kWh, with annual capacity charges of Rs142 billion. The capacity payment for Port Qasim is Rs 122 billion, the plant runs at 18 per cent," it added.
These projects were a result of government policy. Higher capacity payments imply higher electricity prices and higher electricity prices mean higher production costs which further mean expensive food, expensive transport, expensive everything, according to the report.
"The tariffs that Pakistanis pay today is not the price of electricity; it is the recovery of past multi-billion dollar policy errors. This is how middle-class Pakistanis households have slid into poverty – as a consequence of government policy," it detailed.