Impact assessment prior to decision

Qazi Azad

THE cabinet committee on economic affairs, which is headed by the Finance Adviser, has reportedly deferred the decision last Monday on a proposal for a fresh spiral of power tariff. Instead, it has given the decision for forming a high-powered committee with Power Adviser Tapan Chowdhury at its head to assess the likely impact on the economy of a fresh upward readjustment of the power rate. The proposal of the Power Division was to enhance the power rate by Tk 0.45 per unit for the consumers and by Tk 0.37 to Tk 0.52 for the distributing agencies.
Prior impact assessment ahead of decision-making on a subject is a sound management approach. But the establishment in this country often avoided this culture. As a result, there were occasions when government decisions on serious matters backfired. The pains unleashed by the embarrassment usually caused the government to later cry over the split milk.
Perhaps, among many, the wholesale nationalization of industries, their eventual stagnation and ultimate partial denationalization, with the accumulated liabilities shifted to the government and the burden of the newly acquired bad administrative culture to new or old owners, is a glaring example in this regard. It is then no wonder that most of the previous governments in this country had to spend a lot of time in damage control reducing their attention on many urgent issues. One example of it can be recalled here. On having their industries returned to them under the policy of denationalization, the old owners legally refused to pay the interest on the unpaid bank loans of their time prior to government take-over.
The government then had to sit with the bank officials and the owners to craft a way out. In those sittings, the bank officials regretted their inability to write off the interest as it had already entered into their books and annual balance sheets as earning. They also counted their profit and disbursed bonus to employees considering the unpaid interest as income. The government then had to count the state money for repayment of such interest.
Against this backdrop, the decision for impact assessment prior to taking up for consideration the proposal of the Power Division for a new hike of the power rate seems to have been a prudent step. It will enable the government to ward off subsequent exercises for damage control. But the one-month time given for completing the study and for submission of the report does not appear to be adequate. How far such a short study will be objective, wholesome and reliable is a question.
According to some assessments, the small economy of this country is likely to record 6.0 per cent growth in this outgoing fiscal. This small growth rate of the small economy, in spite of too many economic activities, suggests that the sector-wise performance of the economy, measured in terms of their individual profit, is not much encouraging. Even the garment sector, which is acclaimed for earning about three fourths of the export income, is accused of paying low wages, which means that this apparently prosperous sector is also marginally profitable. When the savings on account of low wages accumulate in one or few hands of one or few owners, it may appear big. But how much impact will these savings create on the living of the millions of workers if these are evenly distributed among them?
In fact, no production sector in this country has come up yet with marked buoyancy to be counted as a real prosperous sector-neither agriculture nor industry. But the impact of a fresh power rate hike will be equal on all of them. As all sectors and sub-sectors of the economy do not perform equally well, the Power Adviser and his committee will not be able to make a proper diagnosis of their individual situation if they sit only with the trade promotional bodies, like the Federation of Bangladesh Chambers of Commerce and Industry and its constituent chambers of commerce and industry. They would have to sit with every individual group of industrialists to have the most reliable picture of their financial performance and paying capacity.
The task may be easy; but it cannot be completed in haste within a short time to come up with a reliable finding. It will be also wise not to forget that the service sector in this country, which is not spurred by tourism or by income from foreigners in any other way, will just tumble if the production sectors do not happen to perform well. What then will be the performance of the economy?
The unit cost of power supply in this country is said to be about Tk 4.50 while its selling price is Tk 3.0 approximately. The apparent loss of one third of the investment in the power distribution process cannot be sustained for long. The move for enhancing the power rate further is therefore, seemingly justified. But on bigger economic considerations one has to ask oneself how far it will be prudent at this stage to put a new higher rate of power into effect. Coming on the heal of a 5.0 per cent power tariff increase, which took effect in March, this year, a fresh escalation of its rate would only aggravate public misery.
Export of some items are now subsidized by the government on basis of actual performance. It promotes export. But it also subsidizes, in effect, the living of the consumers in the importing countries. If the power tariff is enhanced to reduce the state loss, which is now about Tk 30 billion, at this time of high inflation, the resultant increase in the cost of production of different manufactured goods and agricultural products will require the various sectors to raise their sale prices proportionately. It will escalate, in effect, the inflation rate and the cost of living to penalize the local consumers for being citizens. What then will be the level of contrast between the advantages and the disadvantages of these two groups of buyers?
The government should wait for the inflation to fall prior to taking any decision for a new hike of the power rate. One has to recognize that the people do not have the temperament or a high threshold for enduring the pains of an escalating cost of living. It seems perplexing that when the government was reportedly contemplating to reduce the effective tariff on imported edible oils for driving their local market prices down, the deferred move for escalating the power tariff, which could stoke prices of local products to run upward, was made. It was, in one word, shortsighted.
Even if it was initiated at the insistence of the donors, the government should think thrice about its implications at this present stage. However, it is good that although the ball was kicked it has not run through between the goal posts.