The government gave its long-awaited approval for a substantial increase in gas tariffs, dealing a heavy blow to the inflation-burdened public, which is likely to exacerbate their hardships.
Government of Pakistan’s Economic Coordination Committee (ECC) of the Cabinet convened in the federal capital under the leadership of Finance Minister Dr. Shamshad Akhtar to grant the green light for a gas tariff hike of up to 193%, effective from November 1, 2023.
This decision comes just ahead of the scheduled review by the International Monetary Fund (IMF) later this month, which had urged Pakistan to address the growing circular debt in the energy sector.
As per the approved proposal, the fixed monthly charges for protected consumers have been increased from Rs10 to Rs400, and for non-protected consumers, from Rs460 to Rs1000, with higher consumption slabs facing charges of up to Rs2000.
The government has raised local gas tariffs by 173% for non-protected domestic consumers, 136.4% for commercial users, 86.4% for export-oriented businesses, and 117% for non-export industries. Exporters will see their tariffs increase by 86% starting from November 1, 2023.
Initially, the tariff increase was proposed to take effect from October 1, 2023, but the ECC granted approval for the change to begin in November 2023.
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In addition to this decision, the Ministry of Industries and Production submitted a proposal regarding the procurement of 200,000 tonnes of urea fertilizers to meet the requirements for the Rabi season 2023-24. The ECC discussed and approved this proposal and also instructed the maintenance of uninterrupted gas supply to the fertilizer industry, with the provinces being called upon to share the importation costs proactively.
Furthermore, a proposal from the Earthquake Reconstruction and Rehabilitation Authority (ERRA) was deliberated upon, seeking approval for a Technical Supplementary Grant of Rs484 million to cover essential expenses, including pay and allowances for 415 contract and project employees from July 2023 onwards.
The ECC directed the Ministry of Planning, Development, and Special Initiatives to identify savings to fund these employee salaries.
Lastly, the ECC considered and approved a proposal from the Ministry of Finance for the establishment of the National Credit Guarantee Company Limited, aimed at supporting credit enhancement for Small and Medium Enterprises (SMEs).