Karachi, October 28, 2023 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has voiced its concern regarding the impending gas tariff hike and highlighted the potential adverse effects on a substantial number of consumers, estimated at around 4.3 million.
In a statement issued today, Irfan Iqbal Sheikh, President of FPCCI, cautioned the government about the severe repercussions that the gas tariff increase may trigger, particularly affecting commercial and industrial consumers. He urged for a balanced approach, emphasizing that Pakistan is already grappling with unprecedented inflationary pressures.
The Economic Coordination Committee (ECC) has already granted approval for the tariff adjustments, with cabinet ratification pending. It is highly likely that the government will implement the new tariffs, commencing from November 1, 2023. Irfan Iqbal Sheikh criticized the proposed hike, labeling it as unsound economic policy and urged for a more rationalized approach, akin to international practices that often support export-oriented industries.
Notably, gas tariffs for export-oriented industries have been raised by a staggering 86 percent to PKR 2,050 per MMBtu, while general industries face an even greater increase of 117 percent, reaching PKR 2,600 per MMBtu. Sheikh expressed doubts regarding the industries’ ability to absorb such a substantial and hastily imposed tariff hike.
In a bid to halt the impending tariff hike, Irfan Iqbal Sheikh has called for immediate intervention from the apex committee of the Special Investment Facilitation Council (SIFC). He emphasized the vital role of SIFC in attracting foreign direct investment (FDI) to Pakistan, underscoring the government’s need to comprehend the importance of maintaining a stable and competitive environment for businesses and production inputs.
Irfan Iqbal Sheikh proposed that the government should address the circular debt in the gas sector by tackling issues such as reducing wastages, eliminating cross-subsidies, conducting comprehensive surveys to determine unaccounted for gas (UFG), recovering dues from governmental, semi-governmental, and private-sector defaulters, and curbing gas pilferages through professional management of distribution networks.
Furthermore, Irfan Iqbal Sheikh extended an invitation to the Federal Caretaker Minister for Energy, Power, and Petroleum for a consultative process to explore alternative strategies to meet the energy and power sector’s obligations to the International Monetary Fund (IMF), while also reducing circular debt and increasing revenues for state-owned gas companies.
Muhammad Suleman Chawla, Senior Vice President of FPCCI, shed light on the cumulative impact of the gas tariff hike, noting that the price for export-oriented industries would effectively be around PKR 2,300 per MMBtu, as an additional 10 percent is being included as part of the blended cost of re-gasified liquefied natural gas (RLNG). He cautioned that the tariff increases for commercial consumers would exacerbate inflation, burdening ordinary citizens. Chawla urged the government to reconsider the tariff hike and prioritize the protection of vulnerable segments of society before its implementation.
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