Increase in utility prices

Another dose of abnormally high increase in gas and power tariffs is on cards. Talking to media persons Finance Minister Asad Umer told that gas and power prices shall be increased in phases. It is pertinent to mention that gas prices had been increased by 141 percent last year and over and above that increase consumer were charged with excessive bills twice for the months of December and February. Gas companies have submitted petitions with OGRA for a further increase of 144 percent on which dates for open hearing shall be fixed.

If the new tariff is approved Sui Northern Gas Pipelines limited will charge consumers with enhanced tariff of Rs.1224 MMMBTU and Sui Southern Company will jack up gas price by Rs. 106.54 from 1st July. Hence consumer will pay gas bills of June at the upward revised tariff. Apart from operational inefficiency of gas companies, rising rate of gas pilferage by industrial, commercial and domestic consumers and default of bills by the industrialists and CNG filling stations owners cause huge revenue shortfall of gas sector. Hence the ill conceived shortcut of upward revision in tariff is frequently sought far. These loopholes in revenue collection can be plugged if government shows some spine and strong political will.

Power sector crises are manifold and needs drastic reforms besides finding out a renegotiated solution of the shady electricity purchase agreements that were earlier made by Benazir Bhutto’s second government 1993-96 with IPPs and last Nawaz Sharif government with Chinese thermal power companies. Federal and provincial governments and government of Azad Kashmir owe Rs. 150 billion to power distribution companies. Moreover, influential political and business elite are not willing to clear electricity bills arrears without surcharges in easy  instalments which have piled up to Rs. 870 billion.

The prices of energy inputs are the highest in the region and further increases in them will not only make life of common man more miserable but further rise of inflation rate from the current 8.2 percent to double digit will also vitiate the already unfavourable economic environment. On the one hand the incumbent government is making hectic efforts to attract foreign direct investment and is signing memoranda of understanding with the industrialized countries but on the other hand pursuing the regressive policies of the previous government which resulted in the macroeconomic imbalances of unsustainable public debt, rising power sector circular debt and bulging current account deficit. To avert the likely default situation, balance of payment crisis and repay foreign loans liabilities, more expensive short term commercial loans of billions of dollars have been obtained from friendly countries. Time is running out and the government is reluctant to put its house in order. The adhoc measures will further exacerbate the prevailing economic woes of the country.