Govt approves massive gas tariff hike, raising concerns of growing financial hardship

The government’s recent decision to approve a substantial increase in gas tariffs, set to take effect from November 1, 2023, has significant implications for the public and the country’s economic situation. 

This decision was made during a meeting of the Economic Coordination Committee (ECC) of the Cabinet, led by Finance Minister Dr Shamshad Akhtar. The gas tariff increase, reaching up to 193 per cent, will have a profound impact on the already inflation-weary masses.

This decision comes in anticipation of an impending review by the International Monetary Fund (IMF), scheduled for later in the month, which had urged Pakistan to address the escalating circular debt in the energy sector.

The approved plan involves various changes to gas tariffs. For protected consumers, the fixed monthly charges will increase from Rs10 to Rs400, while non-protected consumers will witness a rise from Rs460 to Rs1,000, with higher slabs potentially reaching up to Rs2,000. 

Additionally, the government has raised local gas tariffs for different consumer groups, with non-protected domestic consumers facing a 173 per cent increase, commercial users a 136.4 per cent hike, exports an 86.4 per cent increase, and non-export industries a 117 per cent tariff rise. 

Exporters will experience an 86 per cent tariff increase, effective November 1, 2023. It’s worth noting that the tariff hike was initially proposed to begin on October 1, 2023, but it has now been scheduled for implementation in November 2023.

The meeting also addressed other significant issues. The Ministry of Industries and Production presented a proposal to meet urea requirements for the Rabi season 2023–24, which was approved by the ECC. The committee also emphasised the need for uninterrupted gas supply to the fertiliser industry and urged provinces to play a more proactive role in sharing the importation cost.

Additionally, the ECC reviewed a summary from the Earthquake Reconstruction and Rehabilitation Authority (ERRA), which sought approval for a Technical supplementary grant of Rs484 million. 

This grant aims to cover pay and allowances for 415 contract and project employees from July 2023 onwards. The ECC directed the Ministry of Planning, Development, and Special Initiatives to identify sources for financing ERRA employees’ salaries.

Lastly, the ECC approved a summary from the Ministry of Finance regarding the establishment of the National Credit Guarantee Company Limited. 

This company will play a crucial role in supporting credit enhancement for Small and Medium Enterprises (SMEs), contributing to the development of these businesses.

In summary, the government’s decision to increase gas tariffs significantly will impact various consumer groups and is a response to economic challenges, especially the circular debt issue. 

The ECC meeting covered multiple important topics, including measures to address urea requirements, financial support for earthquake reconstruction, and initiatives to boost SMEs through the National Credit Guarantee Company.