Islamabad:
The Pakistan Bureau of Statistics quietly revised down its earlier reported increase in natural gas prices by more than half to 480% – a significant adjustment that also contributed to a lower headline inflation rate in February.
PBS made the revision to the growth rate of natural gas prices without making an adjustment to the methodology. The revision was the result of correcting an error in the calculations, the sources said. PBS had earlier reported that the government had raised gas prices by up to 1100% in November 2023, but the Department of Energy said the increase was no more than 150%.
The 57% drop in the reported price increase figure – from 1108% for the lowest strata to 480% – was even lower than the Energy Department’s claims.
Shortly before stepping down, former Energy Minister Mohammad Ali wrote to Planning Minister Sami Saeed, seeking an adjustment in the inflation figures in the light of observations made by the Petroleum Department in recent meetings.
PBS reported that prices rose by 1109% for Pakistan’s lowest income group, earning as much as Rs 17,732 a month.
Ministry of Planning sources said there was an error in the calculations, which led to the 1109% increase in prices being reported for the lowest quintile. They said that after making this correction, the actual increase in gas prices for the lowest income group was 480%.
But PBS never made a public announcement about the downward revision and quietly released its Sensitive Price Index (SPI) report for the third week of February based on the new numbers. Chief Statistician Dr Naeemul Zafar claimed that PBS did not make any adjustment in gas prices.
The PBS report showed that during the week ending February 22, the increase in natural gas prices for the lowest quintile was 480%. It made a significant adjustment, resulting in a sharp drop in the overall SPI from 34.2% to 30.6%.
This downward revision in gas prices also contributed to the decline in the Consumer Price Index (CPI) in February, which slowed to its lowest level in nearly a year and a half at 23.1%.
The inflated inflation figures have serious implications for Pakistan’s debt sustainability as the central bank sets interest rates based on the headline inflation rate. A 1% higher interest rate costs the country’s economy Rs 260 to 280 billion annually on its existing debt stock.
In January, the Special Investment Facilitation Council (SIFC) stepped in to resolve the dispute over the actual increase in natural gas prices. The dispute came to the SIFC after PBS and the Department of Energy provided different figures two months ago.
The caretaker government had imposed fixed monthly charges in the range of Rs 465 to Rs 2,000 per consumer and argued that these charges should not be part of the price hike calculation. However, PBS included fixed fees in its calculation.
Second, the Energy Department maintains that the majority of consumers were exempt from the price hike.
The sources said a meeting of the technical committee held last week decided that there will be no review of the methodology at this stage.
The outgoing energy minister wrote to the planning minister four days ago and tried to rectify the anomalies.
The Energy Secretary expressed the need for PBS to review its calculations of the cumulative impact of gas price increases in November 2023, which was around 150% and not just a fifth wrongly calculated as 1,100%, and adjust accordingly inflation data.
Ali was of the view that the alleged 1100% increase in gas price had an impact on SPI and CPI. He pointed out that major anomalies have been detected in the PBS calculations.
The Petroleum Department argued that PBS compared the November 2022 tariff structure lowest slab, when the concept of protected consumers did not exist, with the lowest non-protected consumer slabs. This led to a comparison of the November 2022 lowest final tariff of Rs 121/mmbtu with the current lowest unprotected consumer tariff of Rs 500/mmbtu with a fixed charge of Rs 1,000 per month applied.
The Petroleum Directorate claimed that the PBS calculations have errors related to comparison between different categories of consumers and increase in tariffs instead of increase in bill amount.
He argued that increasing the variable gas tariff and adding a fixed monthly charge does not necessarily mean that the tariff increase will be the same as the increase in the monthly bill amount.
The Petroleum Directorate also said that consumption in hectares is not converted to energy units which are mmbtu. All these factors, not taken into account, result in incorrect calculations of the bill amount.
He also added that currently 57% of natural gas consumers in Pakistan fall under the category of protected consumers which is completely ignored in PBS calculation.
The tariff hike of these protected consumers is minimal ranging between Rs 30-100 per mmbtu and the flat rate application to these consumers is also half or even less than non-protected consumers, according to the Petroleum Directorate.
It said the neglect of protected consumers has further compounded the impact of the miscalculation. PBS has taken into account 9.4 million consumers, who have been captured on the respective plates. This is based on the number of meters according to 2018 data and their average consumption per month for the year. As natural gas consumption experiences seasonal fluctuations throughout the year, each meter falls under different consumption slabs throughout the year.
It said that their average annual consumption results in a lower number of consumers in the protected category, when in fact a higher number of consumers were in the protected category during the month of November.
The energy minister wrote that these discrepancies require a thorough review of the calculations that are then reflected in the tariff increases for reporting to SPI and CPI.
Published in The Express Tribune, March 7u2024.
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