Up goes the bill

September 06,2018

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The PTI government seems to be using its honeymoon period to take a number of unpopular decisions. After the hike in electricity tariff, Prime Minister Imran Khan has now approved a massive gas tariff hike. Domestic users will now be paying a mammoth 180 percent more for gas while commercial consumers will pay around 30 percent higher rates. The issue had come under debate in the Economic Coordination Committee but the finance minister had recommended leaving the final decision to the new PM. Petroleum division officials are reported to have explained to the PM why the gas hike is needed – but it is in fact an inconsistent story.

Officials have presented a crisis situation in the two gas companies, apparently due to the failure to increase gas prices for four years. The CEOs of the two companies had told the Senate last week that the gas sector would be in crisis if tariffs were not hiked up soon. That would be all well and good if it weren’t for a nagging question that pops up: how can the price hike be justified when both SNGPL and SSGC continue to show healthy profits in their monthly and yearly accounts? SNGPL alone makes around more than Rs2 billion in profits per quarter. It should be fairly easy for the PTI’s so-called team of corporate experts to check this simple fact – unless those account statements are a joke.

This is one of the great mysteries that will not be explained to the Pakistani public when justifying what is not a normal gas tariff increase. If the government has needed less than four weeks to be convinced to increase gas prices by around 48 percent by profitable public-sector organisations, one is forced to worry about what will happen in loss-making sectors. The recent statements by SNGPL and SSGC CEOs – claiming that a circular debt crisis in the gas sector was imminent – should have been met with a financial investigation, not by bowing down to their demands. There is no doubt a payments issue in the gas sector, but this cannot be dealt with through such a price hike. There may be something more sinister in the mix around, creating a case for privatising the two public-sector entities. Only last year, unfavourable studies into unbundling and privatising parts of the sector were conducted. Well-known LNG tycoons have been calling for the breakup of the gas sector into smaller entities. If the PTI is following this agenda, it owes it to the public to make this clear. The exceptional price hike confirms one thing: the new government’s honeymoon period is over; the party may want to prepare for as much criticism as governments before it have faced.


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