Gas prices for domestic consumers went down by a mammoth 49 percent in July 2012 over the previous month. No, they did not. But the Pakistan Bureau of Statistics (PBS) wants you to believe that. The recently released CPI inflation numbers by the PBS highlight a 49.19 percent month-on-month decline in natural gas price. Gas prices carry a weight of 1.57 in the CPI index, and the aforementioned price decline single-handedly took the housing, water, electricity sub-index in the negative. Recall that Ogra had revised gas prices effective from July 1, 2012 and the domestic consumers (using up to 100 cubic meters) received major relief, but of 19 percent and not the PBS oft-quoted 49 percent. Very interestingly, the price annexure attached with the CPI monthly review tells a different story. It quotes the correct price of Rs116/mmbtu, which is exactly what Ogra announced inclusive of GST. The price annexure for June 2012 also quotes the correct Ogra prescribed gas price of Rs142.6/mmbtu. But the problem is that the difference between these two comes to 19 percent. One would assume that the PBS itself also uses the same numbers for its calculation that it provides for reference to the public. But it appears; someone at the PBS had another set of numbers to work with, as nothing else explains how they reached at a 49 percent decline in gas prices. Hence a rather distorted inflation number of 9.6 percent, which some believe would have been 10.7 percent had correct gas price been accounted for. Then, there is the case of electricity prices which is given a healthy 4.39 weight in the CPI basket. A cursory look at the electricity prices quoted in the CPI basket, would surely leave one wondering why all this fuss over electricity tariffs. The electricity per unit price, according to the PBS data, has remained unchanged in 10 of the last 12 months, undergoing only five percent and 1.6 percent month-on-month hike, in June and May 2012, respectively. The latest per unit electricity price quoted is Rs2, as if the whole power generation mix has now been shifted to hydel generation. How every Pakistani would wish electricity being available at such rate, but normally ends up paying six times more than what the PBS has used as a reference price for measuring inflation. Rs2 per unit is the electricity tariff for lifeline consumers in Pakistan, who use not more than 50 units a month. There is limited publicly available data, but power industry officials believe that lifeline consumers must not be in excess of 10-12 percent of the total domestic consumers. Being lifeline consumers, they are deservedly shielded from major tariff hikes that now continue throughout the year. Excluding a major chunk from the CPI price basket of electricity tariff is surely not serving the purpose right, and not giving the true picture. The PBS in its own CPI review says that "CPI covers the retail prices in 40 major cities and reflects roughly the changes in the cost of living of urban areas". Surely, a large majority of urban consumers will fall out of the lifeline electricity consumer category. Moreover, gauging gas and electricity tariff should be amongst the easier tasks for the PBS officials as it does not entail market survey, collection and sampling. It is just a matter of applying common sense. Blatant understatement of inflation numbers is not a healthy sign for any economy, especially when it has a big say in key macroeconomic decisions, such as the upcoming monetary policy.
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