Speaking at the inauguration function of Pakistan Railway Live Tracking System, the Prime Minster Imran Khan has defended the rational behind the recent highly inflated gas bills. He said that the decision of 140 plus increase in gas price was inevitable to save the gas companies form going insolvent because of huge outstanding debt. He also referred to the gas pilferage of Rs. 50 billion annually.
The Prime Minister may have justified this counterproductive fiscal measure on the basis of briefing that has been given to him by high ups of gas companies. There are a number of reasons for financial crisis of these companies. Gas companies used to be profitable state enterprises. But now these state entities are confronting the issue of massive default of monthly bills by commercial and industrial consumers. The scrutiny of nomination papers of candidates before 2018 general elections brought to limelight the non-payment of bill of CNG filling stations by a number candidates contest ting election for the National and Provincial Assembly seats. Against one candidate who was contesting election against the former PTI Chief Minster an amount of Rs.15 million was outstanding. There is a colossal theft of gas in the industrial sector but the crackdown continues against the domestic consumers. Moreover, in the gas producing district of Karak alone the pilferages of gas by the domestic and commercial consumers annually stands at Rs. 10 billion besides the losses accrued from leakages of rubber pipes used for illegal connections.
The induction of re-gasified liquefied natural gas (LNG) imported at sky-high price from Qatar and commitment charges paid on the unutilized capacity of its terminals is also a contributory factor of gas sector crisis. As per the so far kept secret provisions of LNG deal of PML-N government Pakistan is paying $ 11per MMBTU to Qatar as compared with the price of $ 7 paid by India, China and Australia. The agreement was signed for a period of 15 years and its terms can be re-negotiated after 10 years. That is why Petroleum minister Ghulam Sarwar Khan has to admit that the LNG agreement with Qatar cannot be revised.
In addition to abnormally high price of imported LNG under a shady deal, the unutilized capacity of its terminals is adding to the gas cost. The consumers are paying the idle capacity charges of Port Qasim LNG terminal like the one they are paying for IPPs which is a major cause of power sector recurring circular debt. The extra cost of LNG that will be borne by the consumers in the current fiscal year is estimated to be $40 million. The delay in shipment and bureaucratic procedures are responsible for the extra cost. As per the clauses of the agreement the re-gasification cost has been fixed for the full capacity of LNG terminals whereas 40 to 47 percent of the installed capacity is being utilised. Hence idle capacity leads to higher re-gasification tariff. Ironically, the gas sector bureaucracy has not even revealed the half truth about the causes that converted the gas companies from profit making enterprises into huge losses incurring state entities.
The recipe of raising the tariff of electricity has neither solved the problem pertaining to clearing the commercial loans acquired by WAPDA nor the piling of unsustainable circular debt. It will not bring the desired result either in addressing the financial woes of gas companies. The solution lies in the recovery of the defaulted gas bills from influential industrial and commercial consumers and curbing the menace of large scale pilferages. Regressive gas tariff does not provide the long term solution rather it will encourage the consumption of gas by the domestic and commercial consumers through illegal connections with the connivance of companies’ field officials. This illicit activity is already on in case of CNG filling stations and industrial units.
