Karachi, November 15, 2023 – Pakistan’s subsidized gas policy for residential consumers has come under scrutiny by Sindh’s Provincial Minister for Revenue, Industries, and Commerce, Muhammad Younus Dagha.
Speaking at a meeting with the Karachi Chamber of Commerce and Industry (KCCI), Dagha highlighted that the global best practice involves subsidizing gas tariffs for industries while residential consumers face higher costs, a strategy contrary to Pakistan’s current approach.
Dagha emphasized the need for structural changes, in consultation with the business community, to rectify issues in the energy sector. He expressed concern that industries in Pakistan are burdened with exorbitant gas tariff hikes, a departure from international norms where industries typically bear the actual cost without cross-subsidization.
During the meeting, Chairman of the Businessmen Group (BMG) Zubair Motiwala, who joined remotely, voiced the declining industrial performance since the start of November 2023. He pointed out that the gas offtake by industries, particularly in Karachi, had decreased by over 25 percent due to the prohibitive cost triggered by a significant gas tariff hike.
Motiwala criticized the unprecedented 130 percent increase in gas tariffs, describing it as unjust to a city contributing 54 percent to the country’s exports and 68 percent to the national revenue. He argued that the government’s move could lead to the closure of industries in Karachi dependent on gas for production, with limited alternatives due to space constraints.
Referring to the circular debt issue, Motiwala suggested a phased reduction in gas tariffs to prevent complete closure of industries. He also highlighted the importance of presenting the case of incremental electricity consumption during winter properly to the International Monetary Fund (IMF) to achieve lower rates.
In response, Minister Dagha agreed to arrange a meeting between KCCI representatives and the Chief Minister of Sindh to propose structural changes that could be taken up with the federal government. He acknowledged the challenges faced by Karachi’s business community, attributing them to a lack of unity.
President KCCI Iftikhar Ahmed Sheikh warned of a worsening economic situation, with 50 percent of industries already closed due to enhanced electricity bills. He urged the Sindh government to address infrastructure issues in industrial zones and welcomed digitalization initiatives while calling for the removal of bureaucratic hurdles.
The meeting concluded with a commitment to collaborative efforts to address energy sector challenges and create a conducive business environment.
