No respite for inflation-hit masses as the caretaker government has approved up to 193% increase in gas prices to recover an additional Rs350 billion from them (consumers) for saving gas companies from bankruptcy but turned down a move to completely abolish subsidies for richest exporters and industrialists.
For domestic consumers, the prices have been increased up to 172% while for commercial consumers the increase is 137% and for cement manufacturers the increase in gas prices was 193% with effect from November 1.
From a policy standpoint, the recent gas pricing ‘reform’ endorsed by the interim government to recoup Rs350 billion from consumers marks a positive stride at macro level. This move is anticipated to enhance the likelihood of successfully concluding the initial performance review of the $3 billion Stand-by Arrangement next month, considering that the gas price hike aligns with a primary objective of the short-term IMF loan signed in July. Additionally, it is projected to decelerate the escalation of the gas sector’s ‘circular debt’, estimated to have surpassed Rs2.1 trillion.
The privileged access of wealthy textile owners to heavily discounted, subsidized gas for their inefficient captive power plants exacerbates the situation. This is in defiance of the 2021 decision to cut off gas supply to captive power and redirect the fuel to more efficient generators. The government’s dismissal of a proposal by the planning ministry to entirely abolish subsidies for affluent industrialists underscores the influence of their representatives in the interim cabinet on pivotal, long-term policymaking, typically the realm of an elected administration.
However, the concern over gas affordability isn’t the sole issue for residential consumers. Impending gas shortages, potentially resulting in supply cuts and rationing during winter, loom as a significant challenge for households. The government has announced to keep the policy of the past government of gas supply for eight hours in the winter. The question arises here as to why the consumers have to pay extra to adjust the losses of gas companies and DISCOs when they are taking all privileges and perks. A mechanism should be devised to recover the losses from the companies themselves why should consumers suffer every time?
