Gas tariff hike

Gas tariff hike

Within less than two months after the passage of current year budget an unending series of mini budgets in the shape of increasing the tariffs of gas and electricity and prices of petroleum is on much to the detriment of already deteriorated economic environment. Hardly 40 days before the gas tariff had been jacked up by 200 percent, but again on Friday it was further raised by 39 percent for different categories of consumers. Moreover the gas price was increased by 9 percent for commercial consumers and for the domestic consumers it remained unchanged.

The recipe of filling the fiscal hole which had been caused by shady power purchase agreements with IPPs and liquefied natural gas import deal with Qatar and bleeding public sector enterprises has neither worked in the past and nor it will produce the desired results now. The fiscal hole is constantly widening as the public debt has skyrocketed to Rs. 31.8 trillion and the present government alone has added Rs.7.6 billion to the public debt despite the Prime Minister Imran Khan scathing critique of the previous PML-N government for leaving a legacy of unsustainable public debt to PTI government. The irrational enhancement in the prices of energy inputs will push up the prevailing double digit inflation, further depressing productivity in agriculture and manufacturing sector and sharp decline in exports of both primary commodities and finished goods. The exports are continuously on the downward trajectory for which the high prices of energy inputs are one of the major factors.

The hike in gas tariff will add to the generation cost of thermal power stations that burn it for power production. It will also make expensive the electricity generation cost of captive power plants installed in private sector industries. A permanent solution is required to fill the widening fiscal hole. The annual cumulative losses of 50 plus state owned enterprises public sector enterprises have reached to R.s1600 billion. All these entities must be privitised except the ones which have strategic importance. In President Musharraf government the tariff of energy inputs remained stable which helped in sustaining the economic growth rate above 7 percent although the price of crude oil had gone up above $100 per barrel in the international market.

The sky-high tariffs of energy inputs have shied away foreign direct investment in the past and it will not be attracted even now because of the lopsided fiscal policy that revolves round the frequent doses of mini budgets which vitiates the economic environment for both foreign and domestic investment.

Posted in