Karachi Business Community Protests Soaring Gas Tariffs

Karachi Business Community Protests Soaring Gas Tariffs

Karachi, January 13, 2024 – The business community in Karachi has vehemently criticized the caretaker government for what they describe as an exorbitant and unsustainable increase in gas tariffs, posing a severe threat to industrial operations in the city.

President of the Karachi Chamber of Commerce and Industry (KCCI), Iftikhar Ahmed Sheikh, expressed serious concerns over the unprecedented hike, emphasizing the detrimental impact it will have on the business landscape.

According to Sheikh, the industrial gas tariff has surged by an alarming 118 percent since August 2024, escalating from Rs1100 per MMBtu to a historic high of Rs3200 per MMBtu, including a 40 percent addition of Re-Gasified Liquefied Natural Gas (RLNG) costs. The overall increase amounts to a staggering 191 percent, making it an unbearable burden for businesses.

Highlighting the trajectory of the gas tariff over the past years, Sheikh noted that since October 2020, the tariff has steadily risen from Rs819 per MMBtu to the current Rs3200 per MMBtu. He raised concerns over the decision by the Petroleum Division to authorize Sui Southern Gas Company Limited (SSGCL) to impose an additional 40 percent charge for RLNG on industrial gas supply, suggesting a potential intention to force the closure of industries in Karachi.

Sheikh expressed worries over the compounding effect of these exorbitant increases in energy tariffs, influenced by International Monetary Fund (IMF) directives and other economic challenges. He stated that the fluctuating rupee-dollar parity, coupled with the absence of a level playing field for industries to compete globally, has pushed the industrial sector to the brink of closure.

The President of KCCI underscored the unprecedented challenges faced by export-oriented and import-substitute industries, asserting that the cost of manufacturing has become unbearable. He noted that several industries in Karachi have already ceased production, with many more on the brink of closure due to the substantial increases in gas and electricity prices.

The recent surge in electricity prices, particularly for the export sector, has added to the predicament. The electricity price for the export sector witnessed a staggering 115 percent increase, rising from Rs20 per KWh to Rs43.07 KWh, while general industries experienced a 42 percent increase from Rs30.39 per KWh to Rs43.07 KWh.

Sheikh highlighted the impact of gas tariff hikes on security deposits submitted by industries to SSGC, which have become unaffordable. Additionally, he raised concerns about gas load shedding, indicating that industries are compelled to endure two days of gas load shedding per week.

In his statement, Sheikh also pointed out the cross-subsidy provided to the domestic and fertilizer sectors by industrial and commercial consumers, describing it as highly unfair. He criticized the fertilizer sector for enjoying gas subsidies and alleged smuggling of locally produced fertilizer out of the country.

Enumerating various factors contributing to the high cost of doing business, Sheikh mentioned the rise in minimum wages in Sindh, the escalation of the US Dollar against the Pakistani Rupee, the State Bank’s Policy Rate standing at 22 percent, and other financial challenges. He emphasized that these factors have resulted in a 12.71 percent reduction in national exports from $31.78 billion during July-June 2021-22 to $27.74 billion in July-June 2022-23.

Iftikhar Ahmed Sheikh appealed to the Prime Minister to intervene and convene a stakeholders’ meeting urgently to address the pressing issues faced by the business community. He stressed the need for prudent decisions to support businesses through incentivization, urging a review of the high energy tariffs to ensure the continued operation of industries and economic revival. The fate of Karachi’s industries and the national economy, according to Sheikh, hinges on the government’s ability to make strategic and timely interventions.