ISLAMABAD: While the country reels under crippling power outages and over-billings, the government has told the Supreme Court that continuation of power subsidies would hamper growth by reducing public spending on infrastructure, education and healthcare.

“Given the current fiscal constraints, the government cannot indefinitely carry the burden of subsidies while also providing investments to meet increasing demand of electricity,” argued the government in a petition seeking review of a paragraph in a verdict given by the apex court on Dec 10 last year.

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The court had asked the government to consider increasing subsidy on electricity and extending it to consumers who are not in a position to pay high electricity charges.

A three-judge bench headed by Justice Jawwad S. Khawaja who took up the review petition on Tuesday regretted that the subsidy was being withdrawn by the government on the pressure of international donor agencies.

Was it not the responsibility of the state to extend power subsidy to people, Justice Khawaja observed. The court recalled how the Indian government had been providing subsidy to its people instead of succumbing to international pressure.

The court adjourned the proceedings for 10 days with an observation that it could seek assistance of Attorney General Salman Aslam Butt in the case.

In the review petition, the government told the court that if para 36(vii) was not clarified further, it would open the floodgates of litigation against the government which could be compelled by contumacious litigants to act in a manner which could be against the autonomy policy provided by the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, and the National Electric Power Regulatory Authority (Tariff Standards and Procedure) Rules, 1998.

From 2006 to 2013, the government paid Rs1.1 trillion as subsidy, the petition said, adding that subsidies were intended to protect consumers by keeping prices below the actual cost of providing the service.

Channelling resources freed up by electricity subsidy would help the government to carry out productive public spending like healthcare, education or address infrastructure gaps to boost job-creating growth in the long run.

The review petition emphasised that the government had been effectively sharing the burden of electricity tariff with the public at large. But this is neither sustainable in the long run nor conducive to the development of an efficient and self-sufficient energy sector in the country.

The primary reason for paying the subsidy to electricity consumers has been the policy of sharing the financial burden with the consumers. However, the increasing burden of this subsidy necessitates gradual elimination for financial sustainability of the power sector.

That was the reason, the review petition said, the government reduced the subsidy from Oct 1 last year. But paragraph 36 (vii) has categorically deprecated the withdrawal of the subsidy and has left the government in a quandary over how to continue to make the tariff setting cost-oriented and financially viable without incurring further deprecation by the courts.

It said the government was endeavouring to rationalise the subsidies to make more efficient use of its resources with improved governance and structural reforms in the power sector and in the process also help alleviate budgetary pressures being faced by it.

Published in Dawn, September 24th, 2014