More gas hike?

The issue of gas tariffs in Pakistan is set is to become a major thorn for the PTI government after reports that the country’s two gas companies are looking to spike gas tariffs further. There seems to be complete chaos in operation when a month after the PM Imran Khan ordered an inquiry into the previous increase in gas tariffs, the government may just be set to increase gas tariffs further. Specifically, SNGPL and SSGC have petitioned for anything up to a 145 percent increase in gas tariffs. This figure itself appears bizarre in light of the fact that SNGPL’s actual cost per MMBTU of gas has only increased by Rs66, or 14 percent. On what basis can SNPGL justifiably ask for a Rs722 per MMBTU increase in gas tariffs?

The government too is exploring four gas tariff hike scenarios, between 18 percent and 94 percent. With four managing directors fired in the gas sector since the current government came into power, and a promise of ‘returning’ Rs2.5 billion in overbilled tariffs after the last tariff increase, the much promised ‘good governance’ under new stewardship is nowhere to be seen. Instead, it appears that the figures of what the actual losses are in the gas sector are continuing to go up, despite a major tariff hike in October last year.

We must ask why the first tariff increase was not enough. The government had promised this was necessary to sort out the issue of losses in the gas sector. There is also a need to provide a detailed explanation of how losses in the gas sector have accumulated. On paper, the SSGC and SNPGL have been showing profits in the billions for a number of years, which goes against claims of over Rs368 billion of accumulated losses in the gas sector. If the government does plan on increasing the misery that the public faces, it should be transparent about it. Moreover, the gradualist policy of increasing tariffs slowly seems more a way of controlling public anger, rather than prudent fiscal management. If the numbers are right, Pakistan’s public utilities have been mismanaged criminally. Already, the circular debt issue plaguing the power sector has left the public sector with a Rs1 trillion burden. The numbers seem to show that most of those tasked with managing the Pakistani economy have not known how to do their jobs. Will the current government fare better? It would do well to start with delivering more transparency and asking the right questions when a public-sector company comes to it seeking tariff increases.