LAHORE: Pakistan occupies a troubling position as a country where consumers are squeezed from both sides: by private business interests and by the state itself.
The contradiction is obvious. When the government routinely passes the cost of its own inefficiencies on to citizens, it loses much of the moral authority required to discipline private businesses, prevent profiteering and demand fair prices in the marketplace.
The energy sector provides some of the clearest examples. Consumers are made to pay for electricity theft, transmission and distribution inefficiencies and other systemic weaknesses through their power tariffs, while successive governments have struggled to eliminate the underlying causes. The petroleum sector presents another example, where the interests and margins of various players in the supply chain often receive greater protection than the interests of consumers.
Nowhere is this governance failure more complicated than in the pricing and distribution of Re-gasified Liquefied Natural Gas (RLNG). There is nothing inherently wrong with charging consumers for imported gas at a price reflecting international market conditions. The real question is whether every component added to the imported gas price is transparent, justified and efficiently incurred — or whether consumers are being asked to finance inefficiencies and guaranteed returns within the system.
If import entities receive a guaranteed return of around 10 per cent, policymakers should clearly explain the basis of that margin, the risks it compensates for and whether the return remains justified under changing market conditions.
Even more questionable is the treatment of Unaccounted for Gas (UFG) at different stages of the supply chain. An allowance for losses at the import stage requires particular scrutiny when imported LNG is transferred directly from a ship into the gas transmission system. Physical losses during such a transfer are fundamentally different from the losses that can occur later through transmission, distribution, faulty metering, leakage or theft.
Every percentage point of unexplained loss ultimately becomes another cost for consumers. If import-related margins and loss allowances are calculated as percentages of the value of imported gas, their absolute rupee impact naturally rises whenever international gas prices increase. Consumers therefore face a double pressure: they pay more when the international commodity becomes expensive, while percentage-based margins and allowances also generate larger rupee amounts.
Taxes and levies applied at different stages of the RLNG supply chain can significantly increase the final price paid by consumers. This is particularly problematic when the commodity involved is not a luxury but an essential energy input for households, commerce and industry.
A percentage-based tax also has an automatic inflationary characteristic. Policymakers therefore need to examine whether the existing tax structure is appropriate for an essential energy commodity, particularly during periods of international price volatility.
Financial losses caused by operational inefficiency, theft or weak enforcement should not automatically become the responsibility of honest consumers. Sui Northern Gas Pipelines Limited (SNGPL), Pakistan’s largest gas distribution company, historically operated with much lower levels of unaccounted-for gas than those reported today. The subsequent rise in UFG to around 10 per cent demands far more serious scrutiny than it has received.
Large-scale theft requires access, enforcement failures and, in some cases, possible collusion. Rather than simply recovering the resulting losses from consumers, the government should require gas utilities to identify the precise sources of UFG and establish accountability for each component.
If a distribution company can recover a substantial portion of its losses through consumer tariffs, the financial urgency to eliminate those losses is reduced. The consumer becomes the shock absorber for institutional failure.
Pakistan needs an energy pricing system in which every rupee charged to consumers can be traced to a legitimate cost. Import costs should be transparent. Importer margins should be justified. UFG allowances should be independently verified. Taxes should be rationalised. Distribution companies should be held accountable for losses that arise from their own weaknesses.
Consumer protection must begin with the government itself. Pakistan does not merely need cheaper energy. It needs a fairer energy-pricing system — one in which consumers pay for the energy they receive, not for the inefficiencies of the institutions that supply it. The first step towards protecting consumers is for the state to stop making them pay for its own failures.
