The Oil and gas Regulatory Authority (OGRA) has announced determinations for both the gas distribution companies, SNGPL and SSGC, prescribing a 3 percent and 45 percent increase respectively, in average prescribed gas prices for consumers. The determination has been made after careful consideration, and long deliberation of the petition, and listening to the stakeholders. The ball is now firmly in the federal government’s court to implement the same.
This newspaper and sector experts have long been arguing for more equitable gas pricing regime in Pakistan. Lack of rationalization in gas prices has long been a bane, and has cost the country billions in terms of subsidies, and abuse of the precious fast depleting natural resource.
It is heartening to see Ogra basing the decision of rationalizing gas prices gradually keeping in view the cost of alternative fuels available to the major population of Pakistan. It is no secret that the poorest segment of the country, with no gas connection ends up paying significantly more for heating and cooking purposes, than the slightly better off consumers with gas connections.
The criminal negligence of the outgoing government also played its part in augmenting the problem. Had a gradual rationalization plan been adopted in the last four years, the domestic slabs in the lowest use category would not have to face a sudden jump of three times in gas prices. Even with a three time sudden increase in the lowest consumer category, the price is at 50 percent of weighted average cost of service – and sounds reasonable.
Domestic consumption of gas in Pakistan is considered the most inefficient use, and pricing has played a key role in acting as an incentive for misuse. The prescribed increase in other slabs of domestic consumers also promises to gradually end the cross subsidy, which itself creates a vicious payable cycle, and would also lead to more justifiable use of the precious resource.
General industrial, commercial and power users stand to face an average 30 percent increase in gas price. This may look on the higher side in a go, but considering the fact that they faced no hike in the last four years, should make up for the sudden increase. Mind you, Ogra has also rightfully accounted for the ever increasing proportion of imported LNG in the system, which called for an increase in natural gas pricing.
The federal government still has the authority to tinker with the prescribed rates for one consumer category to another, based on its preferences. A threefold increase in domestic gas prices (lowest slab) will definitely be picked up as an ‘act of evil’ or a ‘gas bomb’ by many. It will be a politically challenging step for the new government to take, right after assuming office. It is best the decision is taken on July 1 2018, by the caretaker setup, as it has no political baggage to take away. Any thoughts of passing it on to the elected government would be counterproductive. Pakistan must avail this opportunity to start undoing the wrongs of yesteryears. Be it the caretakers.
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