Gas price hike and the common man

By Syeda Majeeda Aqeel
The NEWS

Recently the Oil and Gas Regulatory Authority (OGRA) increased the price of gas sold by gas utilities to different consumers with effect from January 1st, 2010. OGRA issued two notifications; first on 31st December 2009, which was somewhat dubious to consumers, so the authority came up with another notification on January 8th, 2010 in suppression to the previous one. In its first notification, the authority did not include minimum charges (the charges for being connected to the gas supply) to the consumers (i.e. domestic, commercial, industrial, CNG stations, cement, WAPDA and KESC power stations etc.), so minimum charges to be paid by consumers were added in the second notification. The said price hike was to increase the revenue of Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGC) as the global lenders demand from the government to keep the revenue of the two gigantic gas distributors at a certain level.

According to the notification, minimum charges for domestic consumers are Rs.128.15, while the commercial units are bound to pay Rs2189.28 per month. The commercial units include clinics, cinemas, laundries, barber shops, tea stalls, milk shops, bakeries, cafes etc. Similarly, the industrial sector is made to pay Rs12893.23 as minimum charges per month. While the CNG stations, cement, independent power producers (IPP) and captive power plants would pay Rs16,982.44, Rs18,087.77, Rs11,206.98 and Rs12,893.29 respectively. There was a total increase of Rs3000 in the minimum charges paid by consumers as compared to the June 30th, 2009 notification. (As shown in the table)

OGRA also fixed the price of natural gas sold by Pakistan Petroleum Limited to WAPDA’s gas tribune power station, located at Guddu, at Rs380.41 and Rs369.97 per mmbtu, respectively.

This increase of 18 per cent has come as a shock to the end users who happen to be the masses in all cases. Commercial, industrial and transport sectors quickly pass on the price hike to the common man. Domestic, industrial and transport sectors mainly consume more than 90 per cent of gas supply.

Transport sector consumes gas in the form of CNG, as a fuel. Pakistan has the world’s highest number of CNG vehicles i.e. over 2 million, and has the maximum number of CNG refueling stations i.e. 2,941 as of July 29th, 2009. The main reason is because gasoline (petrol) prices in Pakistan are the highest in the region. So during the recent years, our transport system has switched over to CNG, putting great pressure on this meager gas resource. Discouraging use of this source of energy through price hike is a foolish idea, especially when oil prices have started escalating again. The current CNG crisis in Punjab and in NWFP is handled through restricted supply which is not a long term solution.

Due to lack of effective planning and timely rectification, the gas sector is on the verge of collapse and if the ongoing decision to suspend gas supply for two days a week is not withdrawn, then the import bill of oil will swell, as CNG is presently replacing at least 3.7 billion liters of petrol per annum which is again a burden on the already huge budget deficit.

The industrial sector is the second largest sector of Pakistan’s economy in terms of output and employment. However, due to many factors both domestic and external, presently the sector is passing through a terrible period, and this decision is worsening the already fragile sector. The sector has already been destabilised by the weakness in domestic demand, excessive power shortage, structural problems, deterioration in law and order situation and decline in external demand emanating from the global recession. In this situation the suspension of gas supply to industries for two days a week is beyond one’s imagination. Non availability of electricity and gas has destroyed the industrial base and the government is not dealing with this particular crisis efficiently, rather it is playing the role of a silent spectator. The industrial area, which is the hub of production, is facing huge losses as a large number of industrial units have stopped production.

In order to tackle with the problem of gas shortage, the government is on its way to implement a risky project of Iran-Pakistan-India (IPI) gas pipeline. IPI, being a doubtful starter entails huge economic and political costs to the country. This project will benefit the seller Iran and the buyer India chiefly. Although Pakistan will be able to purchase 750 million to one billion cubic feet of gas per day, the project can be dicey due to the fact that Pakistan has a fragile relationship with India. The Iranian request clearly made on India’s demand for a guarantee by Pakistan to ensure uninterrupted gas supply to India is unreasonable. This should not happen in order to safeguard our interests.

Within a short time period, the change of autocratic government to the democratic one has caused havoc to the general population. Be it natural gas or CNG, the higher authorities have vested interests to extract maximum financial gains with little or no concern for the average man, who is suffering the most.

Our country is blessed with precious natural gas, but unfortunately due to mismanagement it is being wasted in the form of gas hoarding or theft. During the last financial year, SNGPL and SSGCL recorded a revenue loss of more than three billion rupees, as per OGRA’s annual report.

If squandering of gas is not checked immediately then the entire reserve will deplete within the next few decades, leaving nothing for the coming generation. Special emphasis needs to be laid on the exploration and development of the resource and this can only be achieved by attracting local and foreign investment in this sector, which has a huge potential.



Minimum charges paid by each sector

(In Rupees)

Sector 1st Jan 2010 1st July 2009

Domestic 128.15 108.78

Commercial 2,189.28 1,856.80

Industrial 12,893.23 10,935.13

CNG stations 16,982.44 14,403.25

Cement 18,087.77 15,340.65

IPP 11,206.98 9,504.74

Captive power plants 12,893.29 10,935.13

Notification issued by OGRA