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Hike in gas price the worst decision of present government

It is believed that the Economic Advisory Committee (EAC) constituted by Prime Minister Imran Khan has been signing a mantra that some unpopular decisions have to be made by the incumbent government to put the economy of the country back on track. Reportedly, Prime Minister has given a go-ahead for increasing natural gas rates by an average of 46 percent as determined by the Oil and Gas Regulatory Authority (Ogra) in June and ordered steps to control annual gas theft of Rs50 billion.

While one does not doubt the sincerity of Khan, it may be said without mincing the words that he has been trapped to endorse a decision that is totally against the trade and industry and an attempt to legitimize the inefficiencies, wastages and even corruption in the companies belonging to energy sector (mostly operating under the state control). Let an attempt be made to establish a trail to find out the culprits to save millions of gas and electricity consumers who have been paying their bills in time and in full and also making energy companies efficient. At the same time investigations must also be made against the corrupt officials who connive with the pilferers of gas and electricity.

At present circular debt hovering around one trillion rupees is the most contentious issue. If one recalls the two previous governments led by PPP and PML-N had paid more than two trillion rupees to resolve this issue. Since payments were made without proper audit and no remedial steps were taken to contain leakages, rampant theft and recover the overdue amounts tax payers money was wasted. Ironically, Orgra has accepted gas theft of Rs50 billion annually and asked to increase gas price by 46%. It goes without saying that gas just cannot be pilfered without the connivance of staff of gas distribution companies. Therefore, raising gas price will not bailout these companies unless those godfathering pilferage, embezzlement and corruption are given exemplary punishment. If prime minister of Pakistan can be sent behind the bars why can’t top hierarchy of state owned enterprises face the same fate?

Gas meets nearly 40 percent of energy cost, with power generation companies, industries and transport sectors being the major consumers. Pakistan’s manufacturers, particularly those of textiles and clothing are witnessing erosion in competitiveness because of high cost of energy. The proposed hike will further erode their competitiveness. Power generation will also try to pass on the hike in cost of generation to the consumers. It is on record that each hike in tariff encourages consumers to pilfer more gas and electricity. It is no secret that the top officials of utility companies make tons of money every month.

 

Fertilizer sector is another major consumer of gas. Mari Gas Field was dedicated for fertilizer sector in Fertilizer Policy 2001, but a power plant owned by Water and Power Development Authority (WAPDA) is still supplied gas from this field. At present three units are unable to produce fertilizer because of no supply of gas and two options are being contemplated: 1) resume production on RLNG and make payment of about Rs8.5 billion as subsidy for September-December 2018 period or 2) import the required quantity on which half of this amount will be spent. However, the proponent of second option completely forget another harsh reality that Pakistan’s foreign exchange reserves have shrunk below US$10 billion and the country can’t afford this kind of adventurism.

The wiz kids totally forgot the fact that Sui twins supply only a small quantity of gas to fertilizer plants, whereas bulk of their requirement is supplies from Mari Gas Field that was dedicated to fertilizer industry in Fertilizer Policy 2001.

The entire case of increase in gas price has been prepared by taking into account financials of two gas marketing companies. Reportedly these companies – Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines (SNGP) – had requested the government to implement gas price hike determined by the regulator to bridge their deficits and improve cash flows. The SNGP had informed that it was purchasing natural gas from about 40 gas producers at an average rate of Rs629 per MBTU (Million British Thermal Unit) and selling at Rs399 per unit, with a net loss of about Rs230 per unit. It was reported that SNGP’s receivables stood at Rs165 billion as of August 20, 2018 as against payables of Rs171 billion. The situation is even worse in case of SSGCL facing receivables of Rs203.567 billion against its payables of Rs148.786 billion. The wiz kids totally forgot the fact that Sui twins supply only a small quantity of gas to fertilizer plants, whereas bulk of their requirement is supplies from Mari Gas Field that was dedicated to fertilizer industry in Fertilizer Policy 2001.

Those who have witnessed demonstration against President Ayub Khan know that people came on roads after sugar price was increased by about 25 paisa per kilogram. They say that 46 percent hike in gas price has been proposed by the opponents of Imran Khan to create unrest among the rural population earning their bread and better from agriculture. It is on record that wheat and sugar could not be exported from Pakistan without payment of subsidy. If price of urea goes up by Rs100 per bag it would severely impact the yields of different crops. According to the conspiracy theory, hike in gas price is aimed at creating law and order situation in the country.

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