POLITICAL ad hocism has trumped economics once again. Prime Minister Nawaz Sharif has deferred implementation of the decision by the Economic Coordination Committee to raise gas prices by 30pc for every consumer save urea producers and small domestic users.

The challenge Mr Sharif faces from rival Imran Khan seems to have worked — in favour of consumers.

Know more: Sharif defers gas tariff hike

In financial terms, the decision would have helped the two gas utilities obtain roughly Rs69bn from their customers who would be paying almost one-fifth of the additional amount to finance their losses during the last two fiscals on account of inefficient management of the depleting resource and the latter’s widespread theft.

The remaining sum of money was meant for pulling the distributors out of the red. Besides, it would also help the cash-strapped government partially fix the fiscal hole in its budget to obtain $1.1bn from the IMF next month.

Thus, the gas price raise, if implemented, should bring financial relief to the distributors and the government — though anguish to consumers. Indeed, the gas price increase has its upside and downside. Its implementation would immediately force most middle-class consumers to limit their use of the fuel for heating water and warming homes during winter — or pay a heavy price for it.

The expected drop in domestic use would also mean a significant reduction in the quantity of gas wasted in burning highly inefficient appliances, as well as curb system losses and theft suffered during distribution.

This cut in ‘wasteful’ domestic consumption would make more gas available in the distribution system for the manufacturing industry and power producers to boost sagging growth.

At the same time, however, the gas providers would have another opportunity to hide their inefficient management behind their increased revenues and guaranteed ‘profits’.

It would discourage them from stepping up efforts to bring down their unaccounted for gas level. Simply put, a tariff increase would delay their imminent collapse. But it is not a permanent cure.

Thus, the ECC decision to raise prices without implementing structural reforms is hardly a sensible strategy. We’ve seen failure of this policy in the power sector, which continues to teeter on the brink despite a massive jump in electricity tariffs a year ago.

Instead of delaying the ECC decision, the prime minister should have ordered the ministries concerned to also implement the required structural reforms of gas distributors and increase the supplies of the fuel to drive economic growth.

Published in Dawn, November 24th, 2014