It would not too far off to say that the energy and gas sector have been close to a crisis since the start of the year. Years of an unfit policy, massive electricity and gas theft and fluctuation in international gas and oil prices have lead to an extremely difficult situation currently for the energy sector- a crisis we bore some of the brunt for when the government increased prices for electricity and gas- leading to an inflation of many other items-in September. It appears that the price hike was needed, especially with the revelation that the total circular debt of the power sector is estimated to have crossed Rs1.2 trillion.

The government is seeking the solution by setting specific targets for distribution companies to recover arrears from previous bills and ensure 100pc recovery of current billing. A meeting was held on Friday, presided over by Federal Power Minister Omer Ayub Khan, where the Power ministry set targets for six distribution companies for collection of Rs83bn of past bills and asked them to ensure 100pc recovery targets for current electricity billing.

This decision had to be made promptly due to negotiations occurring with IMF officials, where Pakistan is hoping to secure a financial bailout which creates financial space for at least Rs140bn for the power industry. Setting deadlines and specific targets for distribution companies seems like an efficient idea, as long as the companies are encouraged to adhere strictly to the deadlines.

With these targets, there is unfortunately a possibility of further price increases. However, there are several effective mediums which companies can recover arrears- the most important initiative to take is to end theft and illegal hooking of electricity. The companies also need to practice due diligence by reducing line losses and wastage.