Gas utilities: at a loss to explain
Real reason behind gas price hike is to pave way for the gas utilities to recover their losses
PHOTO: AFP
The gas tariff saw a hike for all sectors, including domestic consumers, with effect from September 1 and was meant to reduce losses of utilities while also reducing the amount of subsidy the government spends each year. It was also seen as a step towards meeting the conditions of the Extended Fund Facility. A step-by-step analysis of developments that happened thereafter, show that the fertiliser sector, impacted by the gas price hike, raised urea prices to offset the increment. Hence, the increase was passed on to consumers, indirectly. But the real reason behind the step, which was not taken since 2013 for one reason or another, including the notorious dharna in the federal capital, was to pave the way for the gas utilities to recover their losses.
We don’t know if the SNGPL and the SSGC are loss-making entities or are able to churn profits. Surprising, but true — since the companies have been unable to publish financial accounts, which have been missing since 2012-13. The two companies are listed and have seen their share prices go up by more than 100 per cent since the start of 2012, albeit less than the corresponding increase in the benchmark. Nevertheless, the basis on which shareholders are trading the scrip is based on numbers given by the organisations and the government. These numbers are not audited and, therefore, not up for scrutiny. In the latest development, the government says the two organisations will continue to face a revenue shortfall. Even though the gas tariff hike would earn them an additional Rs77 billion, the two entities are still likely to face a shortfall of around Rs29 billion. The reason they give is gas theft and distribution losses, mostly in sensitive areas of Khyber-Pakhtunkhwa and Balochistan. This will form the basis for another gas rates hike in the coming months. Why should we buy the argument, given there is an ongoing investigation against the SSGC over none other than the misuse of funds? How come the two entities that have failed to publish their accounts are seeing millions of shares being traded each day? Are the regulators ignoring this?
Published in The Express Tribune, September 7th, 2015.
We don’t know if the SNGPL and the SSGC are loss-making entities or are able to churn profits. Surprising, but true — since the companies have been unable to publish financial accounts, which have been missing since 2012-13. The two companies are listed and have seen their share prices go up by more than 100 per cent since the start of 2012, albeit less than the corresponding increase in the benchmark. Nevertheless, the basis on which shareholders are trading the scrip is based on numbers given by the organisations and the government. These numbers are not audited and, therefore, not up for scrutiny. In the latest development, the government says the two organisations will continue to face a revenue shortfall. Even though the gas tariff hike would earn them an additional Rs77 billion, the two entities are still likely to face a shortfall of around Rs29 billion. The reason they give is gas theft and distribution losses, mostly in sensitive areas of Khyber-Pakhtunkhwa and Balochistan. This will form the basis for another gas rates hike in the coming months. Why should we buy the argument, given there is an ongoing investigation against the SSGC over none other than the misuse of funds? How come the two entities that have failed to publish their accounts are seeing millions of shares being traded each day? Are the regulators ignoring this?
Published in The Express Tribune, September 7th, 2015.