Time for the hard walk
Natural gas prices were increased by up to 143 per cent in order to recover Rs94 billion from consumers
The government is moving from talking the talk to walking the walk. In previous days there had been much speculation in the media that there would be no unpopular fiscal adjustments prior to the local elections — and it was incorrect. On Monday, September 17th, natural gas prices were increased by up to 143 per cent in order to recover Rs94 billion from consumers, at a stroke slashing the subsidies of the last government almost to zero. The knock-on effect is going to be an increase in the financial viability of the gas companies, along with a likely increase in headline inflation and a virtually certain increase in the price of numerous commodities. Electricity is going to cost more possibly by as much as 12 per cent, and the effects of the adjustment in gas prices are going to be quickly felt.
This is not tinkering at the edges of reform, this is walking with the big boots on and it is a risky move. There are 9.4 million domestic gas users and 3.6 million of them fall in the lowest income slab. There is another 2.6 million in the second-lowest slab and they are all voters. The rise for those in the lowest slab is 10 per cent, and it is only those in the highest slab of domestic consumers that are going to be stung for the full 143 per cent, but there are going to be a lot of unhappy customers by the time the next gas bill arrives.
The big gas companies had been haemorrhaging money to the tune of Rs152 billion. This will hopefully drop to Rs58 billion but with natural gas reserves depleting fast the future for the industry is bleak in the long term and Pakistan needs to revise and update the entire power sector, a hard reality indeed. A sense of unreality has become embedded across successive governments, where real prices of utilities such as gas and electricity have been masked by ever-more crippling subsidies. This was unsustainable and the buck has finally stopped at the door of the new government. Strong footwear advised.
Published in The Express Tribune, September 19th, 2018.
This is not tinkering at the edges of reform, this is walking with the big boots on and it is a risky move. There are 9.4 million domestic gas users and 3.6 million of them fall in the lowest income slab. There is another 2.6 million in the second-lowest slab and they are all voters. The rise for those in the lowest slab is 10 per cent, and it is only those in the highest slab of domestic consumers that are going to be stung for the full 143 per cent, but there are going to be a lot of unhappy customers by the time the next gas bill arrives.
The big gas companies had been haemorrhaging money to the tune of Rs152 billion. This will hopefully drop to Rs58 billion but with natural gas reserves depleting fast the future for the industry is bleak in the long term and Pakistan needs to revise and update the entire power sector, a hard reality indeed. A sense of unreality has become embedded across successive governments, where real prices of utilities such as gas and electricity have been masked by ever-more crippling subsidies. This was unsustainable and the buck has finally stopped at the door of the new government. Strong footwear advised.
Published in The Express Tribune, September 19th, 2018.