Instead of tackling the problem of circular debt when it first came up, the government pursued a policy of neglect, which ensured that the problem only got worse, and became inextricably linked to the whole loadshedding issue. The latest idea shows the fecklessness of the government: burden the consumer further, and make him bear the burden of the circular debt, and make him pay it off by raising the tariff. The Water and Power Ministry wants the various distribution companies to raise Rs 151 billion from the consumers so that the loan of Rs 136 billion it had taken, at the cost of Rs 15 billion in interest, could be paid off. The attempt may be inevitable, because the government believes that the circular debt problem has been created by consumer demand. However, the coming tariff increase could well push the consumer beyond limits, and into increasing default. This would leave the distribution companies as badly off as before, unable to service the loans taken out to keep up with the circular debt. There is no indication of any strategy to tackle power theft, or of simple refusal to pay bills.
Some of the worst examples of this are to be found amongst government departments, and because of them, other consumers are encouraged to default, but not have their power cut off. The government departments assume they are indispensable, and therefore immune from having power cut off. Another reason for the power sector needing money is that the gas companies have not just increased gas prices from Rs 6/mmbtu to Rs 42, but have been allowed to pass on the cost of stolen gas and non-recovery of gas bills, Rs 9 billion, to consumers, including the generation companies. Instead of doing the hard work needed to plug these holes, the burden is merely being passed on to the consumer. Ultimately, this will not work, because the economy is depressed, and the capacity to pay has already been eroded.
The government needs to consider whether it wants to go into a general election so soon after the massive hike in the tariff that is indicated. It should keep in mind that the suffering for the consumer will begin to bite at precisely the time the elections will be held if the current Assemblies go to their full term as planned. As the government has not taken any measures except to increase prices, it should do first demonstrate its earnestness by plugging the holes which allow so much money to leak away, which would help ease the circular debt problem.