Fresh gas tariff hike amid consumers woes
WITH THE advent of the winter the government has enforced a fresh gas tariff hike. This is the second price hike this winter. The Oil and Gas Regulatory Authority (OGRA) maintained that the latest hike was a part the governments effort to enhance the profitability of exploring and marketing companies. The CNG price has also been increased. The Consumer Rights Commission of Pakistan (CRCP) has expressed its reservations about the newly introduced weekly based pricing mechanism on the grounds that the price of CNG along with other petroleum products have been increased double fold in the past two months. It is further added that, there is no transparency in the pricing mechanism currently being practiced. Presently, there is no means that the masses or even the stake holders can have access to the input cost or even the formula being used to determine the prices.
It said that the pricing should be based on the cost of service and the gas sector should not charge consumers for its inefficiency and transmission losses.
CRCP also suggested that the government should take alternative measures, instead of increasing tariff, to bear the cost of restructuring process in gas sector. It appreciated the government initiative to restructure the gas sector for long-term benefits, but it should not be on the cost of consumers who were already paying for the inefficiency of gas sector. The present government policies are blemished and causing serious inflationary pressure on the masses, besides causing damages to the CNG sector.
There is chronic and persistent lack of planning in Pakistan or as they say “Poor Planning leads to Poor Performance”. Pakistan still has huge untapped gas reserves. If we allocate more resources to their exploration there is a possibility that in the near future part of the energy resource gap may be met from new reserves. The current gas prices and the limits they place on increasing the profitability of this sector would not attract any reasonable amount of investment, whether local or foreign, since the cost of exploration has gone up substantially and current well head prices do not justify further investment at the current rate of return. Present energy crisis, though also a global problem, has become a critical socio-economic issue for Pakistan and is rooted in the countrys poor governance. Energy demand has increased radically during the last ten year, but the supply has failed to match this growth due to policy failures with respect to:
• Setting up viable new power projects
• Increasing exploration of natural gas, crude oil and coal
• Tapping regional markets and setting up infrastructure for energy imports
• Effective implementation of energy saving plans
• Incentivizing development of other energy sources
Now, this is the time when Ministry of Petroleum and Natural Resources has to sit down seriously and develop a comprehensive gas policy covering all elements of the energy supply chain including power, oil and gas, energy efficiency, renewable energy, and cross links between energy sectors. The policy should provide uniform rules and incentives, visibility, and a level playing field to promote private sector investments. The policy should reflect economic pricing of energy and a phasing out of untargeted subsidies.
There has been a consistent lack of transparency and several governance lapses in the natural gas sector which have led to various kinds of concerns in important areas such as investment levels in blocks, availability of information regarding gas finds, content and process of arriving at pricing and utilization policy, regulatory weaknesses and emerging market concentration.
Pakistan is going through what may be described as existential crisis and almost everyone agrees that the most fundamental and significant reason underlying this crisis is the inequities and injustices that have been prevalent in the state of Pakistan. The situation demands a collective effort on the part of all stakeholders of society, including civil society and citizens, policy and decision makers, scientists and academia, industrialists, entrepreneurs and the government.
Diverse and sustainable supplies of energy are required now, and in the future, in order to sustain growth and competitive economies. Policymakers have responsibilities to develop policies and measures, and an adequate framework in a consistent and coherent way that creates the stability necessary to support the gas industrys operations.
The writer is the Project Manager in the Consumer Rights Commission of Pakistan. His official website is <www.crcp.org.pk>