IT was a bad idea all along for the government to try and subsidise the price of gas for Punjab-based exporters, but having made the promise with such fanfare, at least some obligation to actually deliver on it did exist. It was back in September that the finance minister announced, with a note of triumph, that he had approved a gas-pricing reform that would deliver Rs44bn worth of benefits to exporting sectors, particularly textiles. The idea was to equalise the price of gas across the country, since the Punjab industry claims they pay almost double what their peers in Sindh have to pay for gas, which is widely used as a fuel for captive power generation by industry. The vow to equalise the rates by bringing down the price of gas for industry in Punjab from $1250 to $600 per mmbtu was hailed by the business community immediately, which had lobbied hard for this step for years. They promised to double exports in the current fiscal year, and over 100 mills that shut were reopened.

But a nasty surprise awaited them in November, when the latest bills issued by the gas company were based on the old tariff. Jolted by the news, the mill owners reacted angrily, and were placated with a renewed promise that the government was unable to notify a reduced price due to bureaucratic reasons, but had now committed to providing a subsidy which would be activated by next month. It even shared with the exporters the mechanism through which the subsidy would be disbursed. But now, indications are appearing that the government may not be in a position to afford this subsidy either. As talks get under way with the IMF, which generally frowns on subsidies, and spending caps are about to become a standard feature of government financing, the fate of this promise hangs in the balance. It was a little unrealistic on the part of the finance minister to concede this point to exporters without carefully considering who would bear the cost. It was also a bit optimistic on the part of the industry representatives to build their expectations around this promise to such an extent. It is debatable whether there needs to be a uniform gas price across the country, but having made the commitment and celebrated it so publicly, the government is now bound to make a strong push to deliver on its promise.

Published in Dawn, November 11th, 2018