Ahmed Khan Malik

The industrial sector of the port city of Karachi is feeling the heat due to the latest hike in gas tariff, and a further hike in the coming months may lead to the closure of industrial units. The government’s attention has been drawn to this serious issue time and again, but there has been no official word about a reduction in tariffs so far. Talking to WealthPK, Jawed Bilwani, Vice Chairman of Karachi-based Businessmen Group, said the industries had been burdened with the new gas tariff due to the government’s unfair subsidy and support for the fertilizer, domestic and power sectors. “The industry demands a fair gas tariff of Rs1,350 per mmbtu and will never accept the unbearable gas tariffs ranging from Rs2,100 to Rs2,600 per mmbtu, which have been imposed to please the fertilizer, domestic and fertilizer sectors and terribly penalize the country’s industrial sector,” he said.

“We will only wait till the first week of December for the government to announce a reduction in the gas tariff. If it does not happen, we will have no choice but to intensify our protest,” he said. Bilwani said the business community still awaited the promised reduced tariff of Rs20 per unit on incremental consumption during the four months of the winter season. “The gas tariff for the fertilizer sector in the neighboring country is $6.5 per MMBTU whereas in Pakistan, the industrial sector is being supplied the gas at a much lower rate. This makes no sense, as this sector enjoys a profitability of around Rs40 billion besides receiving subsidies on gas tariffs. It is a matter of concern that the fertilizer being produced in Pakistan through the subsidized gas is being smuggled out,” he pointed out.

Bilwani said 95 percent of the subsidy on RLNG was consumed in the SNGPL network, where the RLNG consumption was between 800 and 1000mmcfd, while in the SSGC territory, only 50mmcfd was being consumed, but the SSGC-linked industries were burdened with cross-subsidy to benefit the other sectors. “Nowhere in the world are export/import substitute industries burdened with cross-subsidy to benefit other sectors, but rather, they are facilitated to lower their cost so that they could compete globally to enhance exports,” he added. Talking to WealthPK, President of Karachi Chamber of Commerce & Industry (KCCI) Iftikhar Ahmed Sheikh believed that rather than focusing on finding ways and means to increase gas supplies, the government was contemplating upon re-prioritizing the existing gas supplies, switching from one set of consumers to the others and raising the tariffs to a completely unbearable level. This, he said, was purely against the spirit of Pakistan’s Constitution and a sheer violation of Article 158.

He said the government had to understand that a 100-130 percent increase in industrial and captive gas tariff will be highly detrimental to the economy, as it would lead to the closure of industries, trigger lay-offs and huge retrenchment of labor force which might result in a serious law and order situation, steep rise in street crimes and bankruptcy of the manufacturing units. “This unwise move to raise gas tariff will badly hit the value-added exports and the industrialists will have no other choice but to revert to exporting the raw materials, which would provide a perfect opportunity for the competitors to easily take over Pakistan’s exports share in the international market.” He said the industries of Karachi were already facing the high cost of manufacturing due to the highest water tariffs, disruption in the supply of utilities and additional costs due to the precarious law and order situation; therefore, the government must immediately withdraw the hike in gas tariff and bring it down to the acceptable level of Rs1,350 per mmbtu.

Credit: INP-WealthPk