The Politics of CNG Pricing

Should the Supreme Court intervene in the economy?

That is one of the questions at the heart of the October 25 Supreme Court hearing involving CNG. The court argued that CNG prices were being artificially inflated and that this was imposing an unfair burden on the public. The result of the court hearing was an order to reduce the price of CNG. Opponents of the Supreme Court believe that the court had no right to intervene in the economy in such a manner and that the order was driven less by respect for the law and more by populism and a need for the judiciary to assert itself against the government.

The reality is that the Supreme Court was operating well within its limits when it ordered the lowering of CNG prices and it wasn't needlessly intervening in the economy.

The primary responsibility of the Supreme Court is to interpret the law. Any order that it gives can and should be considered politically legitimate if that order is driven by the need to ensure that the law is not misinterpreted in any way.

CNG prices are regulated by the Oil and Gas Regulatory Authority (OGRA). In particular, OGRA is responsible for determining the components that go into the CNG pricing formula. For example, the operating cost of CNG stations and the profit of CNG station owners is included in the final CNG price.

According to the Supreme Court, OGRA is not legally authorized to arbitrarily set these two price components because there is no legal statutory provision that gives OGRA such authority. That is why CNG prices should be considered artificially inflated. By arguing in this manner, the Supreme Court is focusing on the legality of the situation. It isn't making an economic argument. As such, it is operating well within its legal domain and is not delving into something outside its expertise.

That the Supreme Court is not overstepping its limits is further evidenced by the fact that the court did not attempt to perform OGRA's job and set the pricing formula on its own. Rather, it delegated the responsibility of coming up with a new pricing formula to OGRA.

Given the recent confrontation between the Supreme Court and the PPP government, it isn't surprising that this verdict has resulted in a host of politicized statements against the judiciary. Aitzaz Ahsan, a former president of the Supreme Court Bar Association and a current PPP senator, denounced the court for getting involved in an issue like CNG pricing, which to his mind is too trivial a matter for the highest court in the country.

One way of determining whether an issue is important enough to be investigated by the Supreme Court is to consider how many people are affected by the issue. In this case, the widespread use of CNG within Pakistan virtually ensures that there will be a substantial impact on Pakistani consumers. If CNG prices are indeed being artificially inflated, then an economically unfair burden is being imposed on a wide range of Pakistanis.

There are other ways by which this case affects a wide range of people. Besides the CNG industry, this court order may result in a discouragement of illegal price-fixing in other sectors of the economy. As well, the verdict may shine a spotlight on other regulatory agencies and force them to reform themselves in much the same way that OGRA was forced to review and reform its CNG pricing formula. In short, the claim that CNG prices are too trivial a matter for the Supreme Court to investigate does not hold because the potential economic effect on the public is too great.

The economy is not something that can very easily be tinkered with. It is a complex system that doesn't respond in a predictable manner when it is interfered with. For example, this particular court order to lower CNG prices has resulted in CNG station owners shutting down in protest. That is hardly the result that the Supreme Court or the original case petitioner were hoping for. This, however, is no excuse to allow the rules to be bent so that some players in the economy illegally benefit at the expense of others.

It is clear that the Supreme Court was operating well within its legal domain when it issued the court order. And far from interfering in the government's work, the court delegated the responsibility of CNG price setting to OGRA. At first glance, the issue of CNG prices may seem trivial. But it has far-reaching implications for the Pakistani economy and, by extension, the average Pakistani consumer.

Judiciary vs Executive

The first thing that should strike the mind in the ongoing confrontation between the judiciary and the executive is that there is no obvious answer regarding who is right and who is wrong.

Both sides are seemingly correct in their own way. As far as the judiciary goes, they are protecting the constitution. Who can fault someone for that?

What of the executive? President Zardari and his gang of coalition allies. From the outset, they have consistently reiterated that the parliament is the country's supreme political institution over and above the judiciary and that members of parliament are the true representatives of public will. By consistently equating the executive with the parliament, Zardari and his supporters have tried to portray the judicial attack on the executive as an attack on democracy. By attacking democracy, they say, the judiciary is implicitly pushing for military rule. This is particularly dangerous in a country that has experienced long bouts of military rule. It is particularly dangerous in a country which is presently experiencing one of its longest periods of democratic rule. It is particularly dangerous in a country which is going through an economic and fiscal crisis that may worsen if the political system becomes any more unstable.

Except, one cannot equate the executive with democracy as the PPP is doing.

When discussing this confrontation, it is not enough to nonchalantly refer to the side confronting the judges as simply the "politicians". Or "democracy". There are many types of politicians within a democratic system and they all come together to make it a working system. There are many components in a democratic system and the executive is but one of these. The judiciary is not taking on democracy specifically; it is taking on the executive as represented by the ruling PPP government.

To say that the judiciary is taking on the entire institution of democracy is, at best, inaccurate and, at worst, defamation.

Why the need for this distinction between democracy and executive?

Because, it is possible for a country to experience democratic rule as Pakistan has been doing and simultaneously suffer at the hands of an inept ruling government. Democracy, as a system, is not to blame. But one of its components is blameworthy. What the PPP is doing is blurring the fine distinction between democracy and the executive. Zardari is hiding behind the cover of democracy to disguise his executive's shortcomings.

But is it possible that pressuring the ruling government can eventually disrupt the entire democratic process even if the judiciary doesn't want to? Just because the judiciary does not intend to destroy democracy doesn't mean that it won't. No one - the judiciary included - is capable of predicting the results of the judiciary's constant pressuring of the civilian government.

Given Pakistan's history of military rule, this is a real danger. However, the danger is overstated. Pakistani democracy has been around for too long and the concept of multi-party politics is too firmly entrenched in the Pakistani psyche. Even when Musharraf ruled, he was forced to do so through the PML-Q. As such, even if the civilian government was ousted, it would come roaring back. The net result of such a turn of events would be Pakistan going through military rule only to inevitably come back to democratic rule.

Far from disrupting democracy, the courts are performing two vital functions by attempting to hold the PPP accountable.

They are asserting their own autonomy and creating their own identity among the various political institutions. This is important because a functioning democracy requires a delicate balance of power between all institutions. Dysfunction occurs when one institution does not have its own identity and becomes subordinate to others. One example of this is when the judiciary loses its identity and becomes a puppet of the executive as has so often been the case in Pakistani history.

Further, the courts are setting a unique precedent for future democratic governments: that it is not enough to simply be elected into power. A government must deliver upon its public mandate. If it doesn't, then that regime will be held accountable. Not through military might, as in the past, but through the rule of law.

When looked at from this angle, the confrontation between institutions becomes clearer.

The executive is in the wrong. The judiciary, in the right.

Rental Power Plants: Have the lessons been learned?

The Supreme Court verdict on the Rental Power Plants (RPPs) raises a number of important issues regarding Pakistan's state institutions.

The verdict reminds us that the Supreme Court remains one of the few functioning state institutions committed to genuine reform of the existing political order. Whether or not one agrees with its final verdicts, there is no denying the urgency that the Supreme Court displays in hearing as many cases as possible. Furthermore, there is no question regarding the crucial nature of the cases that the Supreme Court takes on. From the Prime Minister's contempt of court case to the Mehran Bank case, the stakes are high and the final verdicts can have serious implications on the current political order.

The RPP verdict effectively strikes at the heart of one of the major problems in Pakistan's state machinery. Politicians and bureaucrats have a tendency to try and reinvent the wheel when it comes to solving many infrastructure problems. This stems from the need of the ruling government - whether it be military or democratic - to put their personal stamp on highly visible projects and market themselves as saviours of society. In this particular case, there already existed sufficient electricity generating potential before the introduction of RPPs. Therefore, the RPPs represent wasted public resources that could have been spent on repairing and not reinventing the wheel.

The RPP verdict also touches on whether infrastructure solutions should be for the short-term or the long-term. By declaring the RPP contracts void, the Supreme Court is sending a strong message that the government should focus on long-term solutions. Regardless of whether or not the RPPs would have been ultimately successful in providing for the electricity needs of the population, substantial work remains in revamping and revitalizing the existing power infrastructure. Such reform must take precedence over reactionary power generation schemes like RPPs, which promise only short-term relief.

Which brings us to the state institutions that work alongside the Supreme Court.

For a democratic system to not simply exist but to also deliver results, consistent pressure must be applied on all state institutions. Only then will they mature and only then will democracy deliver results. But relying on the Supreme Court to settle each and every national matter takes the burden off the other state institutions to do much of anything. For example, the job of holding the RPPs accountable could have just as easily been performed by a parliamentary committee.

Relying on the courts to deliver a verdict can also give the false impression that justice has been served when the successful verdict finally arrives. However, getting such a verdict is only half the battle because the verdict serves no purpose if it isn't used to prosecute the accused. The courts can only interpret the law but they can't implement the law by prosecuting criminals. That job falls on institutions like the National Accountability Bureau and the Ministry of Interior.

In short, the verdict is in but the work has just begun.

The real success of the RPP case should be measured by whether the people implicated in the verdict are successfully prosecuted. It should be measured by whether or not state institutions finally understand the importance of long-term infrastructure reform. It should be measured by whether or not politicians finally stop initiating projects that bear their personal stamp and start initiating ones that ease a growing population's load-shedding misery.

Gilani's Problem wih the Law

Morality is timeless. But legality isn't.

Any government which only worries about the legal force of its positions and doesn't care about their positions' moral force is only focusing on the short-term and cannot be expected to bring about long-term prosperity for its country.

The Gilani government's ongoing conflict with the judiciary will be analyzed for some time to come. The lengthy arguments and counter-arguments between Aitzaz Ahsan and the Chief Justice will be picked apart continuously. And several themes will no doubt emerge.

The most important one is how the PPP government views the role of law: it is an instrument with which one can gain political power and then hold on to such power. Gilani's government is interested in proving the legality of its actions but is not at all interested in the underlying morality of its legal arguments.

How else can one explain some of the content in the appeal that Aitzaz Ahsan filed to the Supreme Court?

One argument asks whether it is possible for a Prime Minister to have contempt for the Supreme Court when that same Prime Minister gave the order to release detained Supreme Court judges. Do Aitzaz and Gilani not realize that the release order may have been politically motivated and therefore have nothing to do with how much respect Gilani has for the courts? Do they not realize that it is possible for a person to respect the courts at one point in time and then perform an action that shows contempt for those same courts at another point in time?

Of course, they do.

Another section in the appeal notes the irony of a Prime Minister possibly being sentenced by the same judiciary that he released. Do Aitzaz and Gilani not realize that whether or not a certain outcome is ironic has no relation to whether or not that same outcome is just?

Of course, they do. History is full of such ironies.

Yet another section of Gilani's appeal asks whether it is reasonable for the Prime Minister to be sentenced by Supreme Court judges when the individuals who were originally responsible for the sacking of the judges have yet to be formally charged and indicted. Do Aitzaz and Gilani not realize that the sentencing of a criminal should not be dependent on whether or not some other criminal has been successfully indicted?

Of course, they realize this. By their warped logic, no criminal would ever be sentenced because there would always exist some other criminal who is free and has yet to be sentenced.

The above legal arguments were of such dubious nature that Aitzaz Ahsan was forced to remove them from his appeal under pressure from the furious Supreme Court judges who believed that Gilani was trying to influence the judiciary. Ultimately, the Supreme Court rejected Gilani's appeal and will formally indict him.

Gilani's upcoming Supreme Court appearance gives him an opportunity to demonstrate whether he and his government have learnt anything from this sorry episode. Are they ready to start using the law for a higher moral purpose than simple political gain?

Democracy's next chapter

The familiar refrain of a democracy under threat is once again making the rounds in Pakistan.

The source of these worries is the image of the ruling government having to defend itself in the face of pressure from the military and the judiciary.

Last month, Prime Minster Gilani cryptically referred to the military establishment as a "state within a state" that must bow down to the government. More recently, Gilani reminded the judiciary of his public mandate to rule and the supremacy of the parliament above all else when he addressed the National Assembly during the passing of a pro-democracy resolution.

The culmination of the face-off between these state institutions occurred when Gilani appeared in the Supreme Court to defend himself against charges of contempt for not initiating cases against President Zardari. If Gilani is found guilty, it may potentially force early elections. To the casual observer, this situation seems ripe for democratic instability.

However, the Prime Minister's Supreme Court appearance is actually a good thing for Pakistani democracy in the long-run.

Democracy has been described as government of the people, by the people, for the people. In its present form, Pakistani democracy is certainly of the people, and by the people. That is why Gilani can repeatedly refer to his public mandate to rule and continually trumpets the supremacy of a parliament that is full of his coalition allies. The elections that brought the PPP and its allies to power were not as free and fair as we would have liked. But they were elections, nonetheless. In that sense, the present government is a legitimate expression of popular will.

By only focusing on his party's popular support, however, and forgetting his responsibilities as Government CEO, Gilani conveniently forgets how democracy cannot simply be by the people and of the people but must also be for the people.

It is that sense of accountability for the people that Gilani's Supreme Court appearance should be taken to represent.

It is likely that not much will come out of all of this due to the presidential immunity granted to Zardari via Pakistan's Constitution, and the Vienna Convention. What is more significant is the symbolism behind the Supreme Court attempting to hold the government accountable for not acting upon the judiciary's recommendations.

A frequent complaint against such open questioning of the government is the need for stability. This argument says that Pakistani democracy is inherently fragile and undue stress must not be placed upon it. Such an argument is particularly powerful in a country that has experienced sustained periods of military rule and where the military is perceived to hold sway over the civilian government even during times of democratic rule.

The argument, however, does not hold because it underestimates the strength of Pakistan's democratic structures, which have endured even during military rule.

Consider the Musharraf era. From the outset, Musharraf was forced to govern through parliamentary allies. He sought to legitimize his rule by seeking a show of support from the parliament. He tried to lengthen his rule by granting amnesty to popularly elected politicians. When he was forced out, it was due to a populist movement.

Democracy in Pakistan has progressed too far for it to be brought down so easily. What is needed now is for democracy to move beyond a simple expression of popular will and towards a system where the ruling government - no matter what party it happens to be from - is held accountable, whether it is the Supreme Court that does the accounting or the voters at the next election.