The Oil & Gas Regulatory Authority finally notified the revised consumer-end gas prices – two weeks after the ECC nod. A lot has been said and written about how absolutely essential it was for the government to notify the revised prices- and for all the right reasons too. Even this revision has come with a delay of four months – and that too because we find ourselves under an IMF program. The government has tried to downplay the inflationary impact by suggesting that it barely impacts majority of natural gas consumers – mostly in the protected category – as the base tariff remains unchanged.
And that essentially was the whole idea when protected slabs were introduced earlier in the year – as the name suggests it is meant to isolate the bottom income quintiles from tariff hikes. It is, therefore, every bit ironic that it is the protected category, and within it the least consumption brackets, that end up facing the highest percentage increase from last revision.
The minimum monthly bill for protected consumers (inclusive of GST) is Rs646/month – higher 2.5 times from January 2023 revision. This is despite base gas tariff staying unchanged. The real blow has been dealt by the mysterious “fixed charges” which go up from Rs10/month to Rs400/month. The effective tariff for 1 mmbtu in the protected category excluding GST is Rs574. For unprotected consumers, the first mmbtu in the lowest consumption slab costs Rs1370 – as the fixed charges shoot up from Rs460 previously to Rs1,000/month.
Now, there is no denying that pipeline gas in Pakistan has been priced criminally low for decades, and that there was always room for correction and this space has time and again advocated for the same. But things should not happen in vacuum and outside the ambit of law. This is precisely what is happening in case of consumer-end gas tariffs – as the government tried to make up for its yesteryears’ inefficiencies by violating standard rules.
Natural gas price setting rules do not allow for any charges in excess of the relevant determined tariff. The tariff determination authority if OGRA – and if the government wishes to not increase prices for any consumer category – that can be done in the name of subsidy. But the rules do not provide for any fixed or variable charge in excess of what has been determined by the regulatory authority. In case the government wishes to levy additional taxes, it is free to do so – but the case of “fixed charges” is not that of taxes or duties.
The Natural Gas Tariff Rules 2022 clearly stipulate that “no licensee shall charge…any fixed or variable amount in excess of the relevant determined, approved, modified, or revised by the Authority”. Ogra’s final determination in this regard has no mention of any fixed charges. So, the question arises that how the government charges domestic consumers something that the rule book does not allow. Mind you, the increase hits the protected and low consumption slabs of unprotected category – which by most estimates – account for over two-third of all consumers.
The regulator has also continuously disallowed the prior year’s shortfalls. The government’s failure to do the needful to implement the WACOG bill is also well-documented, and the regulator did not entertain the government’s petition in this regard before the government comes up with a revised plan. So, it appears that fixed charges and going beyond the determined revenue requirement by Ogra –are tools to plug the hole.
Funny how they will not implement something that the rule allows (WACOG) but will twist and end up doing something not in the rule book. Fixed charges stand on flimsy grounds, if any, and could well be challenged in courts. Reforming the gas sector is very important – but it must be done within the rules. Then again, the country was supposed to have already be done with general elections, if rules meant a thing.
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