Gas tariff increase

Published November 10, 2023

THE recent sharp increase in the price of natural gas for different consumers has sparked a debate over its adverse impact on lower- to moderate-income households grappling with the soaring cost of living and shrinking incomes for over two years. The increase is going to especially hurt 57pc of household consumers categorised as ‘protected residential consumers’, whose fixed charges have been jacked up by a whopping 3,900pc from Rs10 to Rs400 a month, as well as small industry owners. The justification for gas price ‘rationalisation’ to slow down further expansion in the gas sector debt of over Rs2.5tr notwithstanding, the new tariffs threaten to push up the winter bills of financially weaker segments manifold, exacerbate the near-term spike in consumer inflation, and lead to job losses as small business owners cut costs to protect their profits. How households will cope with their high heating costs in an inflationary environment is anyone’s guess.

While it is hard to not feel sorry for the weaker segments of society, criticism of wealthy exporters against the hike in gas price holds little merit. The decision to raise the price for the exporting industry by 86.5pc and apply the new tariffs uniformly across the country is a welcome step. Indeed, the rationalisation and application of new uniform but increased gas tariffs will eat into the profits of the exporters and industries based in Karachi and other parts of Sindh who were getting the fuel at much cheaper rates than their counterparts in Punjab who had to use significantly more expensive imported gas during winters due to ever-rising domestic supply gaps. Hence, the opposition to the new prices emanating mostly from Karachi is not surprising. That said their argument that the decision to supply gas to fertiliser manufacturers and the extremely inefficient captive power plants of rich yarn exporters from Punjab and elsewhere does have merit. The country’s fast-depleting domestic gas reserves and our increasing dependence on expensive gas imports demands a revision in this policy. It is advisable for the government to hike the rate of gas being supplied to fertiliser companies in order to bring them at par with the rest of industry. Simultaneously, it must rethink its policy of subsidising fuel for the wasteful and inefficient captive power in clear breach of a previous policy decision made in 2021.

Published in Dawn, November 10th, 2023

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