Caretaker govt hopes gas tariff hike to address ‘economic woes’

ISLAMABAD: Caretaker Minister for Energy on Tuesday defended the government’s decision to hike monthly charges and consumer rates for natural gas, saying that the move would address Pakistan’s economic woes, ARY News reported.

The caretaker government approved a whopping increase of up to 3,900 percent in the fixed monthly charges, and 194 percent in the consumer rates for natural gas, effective from November 1, 2023.

Last week, the Economic Coordination Committee (ECC) of the federal cabinet approved the increase in gas prices at a meeting chaired by Finance Minister Dr. Shamshad Akhtar.

Addressing a press conference today, the energy minister said that the decision to increase the gas tariff was a “challenging one” for the caretaker government but it had been taken in the best interest of the country.

“If we had not increased the gas prices, the country would have continued to incur a loss of Rs400 billion,” he said, adding: “If the country had progressively increased these prices in the past, we would not have raised these rates so much.”

Muhammad Ali noted that for the past decade, Pakistan has been unable to meet the local demand for gas without the help of imports, resulting in a significant decrease in Pakistan’s foreign exchange reserves.

“Because of rising fiscal deficit, we were prone to more borrowing,” he stressed, adding: “These loans are making us more vulnerable to inflation.”

The energy minister further said that inadequate gas pricing in the previous governments and no financing for the imported gas diversion over the years dented the national exchequer and created a circular debt stock of Rs2.1 trillion (without interest).

For the past decade, most of the international companies for natural gas exploration have left Pakistan because of losses, the minister regretted, rendering Pakistan unable to meet its demands without imports.

He expressed hope that the recent gas tariff hike – as per the directions of the Oil and Gas Regulatory Authority (OGRA) – would help reduce the growth of the circular debt, lower inflation, control interest rates, and decrease fiscal deficits.

He expressed the hope that the introduction of new gas prices would encourage more international companies to come in the exploration sector.

Subsidy

During his presser, the minister said the new tariffs would not affect the protected 57 percent category of domestic consumers since the government had only increased their fixed monthly charges from Rs10 to Rs400.

“The tariff will increase with consumption. The rich will pay more.” He highlighted this was a “progressive” hike which will not impact the vulnerable segment of society.

Muhammad Ali also said that the government would provide around Rs384 billion subsidy to gas consumers of different sectors including domestic, Tandoor, and Fertilizer aimed at lessening the inflationary impact on the common man.

He elaborated that Rs139 billion gas subsidy would be given to domestic consumers, Rs45 billion to the fertilizer sector, and Rs200 billion to Roti tandoors.

“The government has completely unchanged the sale price for gas supplies to Roti tandoors because “Roti” is a prime and foremost necessity” he added.

He said that it is still ensured that the monthly bill of protected class does not exceed Rs900 on consumption of 0.9 hm3 in a month.

Another sector he talked about was fertiliser, the energy minister stressed that the local farmers will not be affected by the hike.

“We have tried to reduce the disparity between the north and south industries,” he underscored that the factories in the north often paid double of those in the south.

“If anyone wants to set a new factory, they are at a disadvantage of paying more for gas,” he said, “which has reduced competition in Pakistan.”