Pakistan’s caretaker government, on February 15, approved a substantial 67% increase in the natural gas tariff, effective February 1, to meet a deadline set by the International Monetary Fund (IMF).
The decision was ratified during a recent meeting of the federal cabinet, chaired by caretaker Prime Minister Anwaarul Haq Kakar, where all resolutions proposed by the Economic Coordination Committee of the Cabinet were unanimously approved, including the sharp increase in gas prices.
This marked the third consecutive price hike, that consumers must bear with, imposing an additional burden of Rs242 billion on consumers, with the government set to earn Rs37 billion in sales tax revenue from these adjustments.
Tariff increase across different consumer categories
The revised tariff structure, as outlined in the notification, presents varying increases across different consumer categories, which are mentioned below;
- Consumers using up to 0.25 hundred cubic meters (hcm) will face a 66% increase, with the new tariff set at Rs200 per million British thermal units (mmbtu).
- Consumers falling within the 0.5hcm category will experience a 67% hike, with rates escalating to Rs250/mmbtu.
However, the burden of the tariff hike is not evenly distributed, as seen in the differentiated rates for various consumer categories. For instance;
- Those consuming up to 0.6hcm will see a 33% increase, with rates climbing to Rs300/mmbtu.
- Larger consumers, such as those utilizing up to 4hcm, will face more modest increments ranging from 8.6% to 25%.
Despite the widespread increase, certain sectors have been spared from the tariff hike, including essential services like ‘Roti Tandoors’, cement factories, and small businesses such as cafes and bakeries. This exemption aimed to alleviate the potential burden on businesses already grappling with economic challenges exacerbated by the ongoing pandemic.
The decision to spike gas tariffs, though anticipated, drew mixed reactions from various segments of society. While some argued it as a necessary step to address the financial woes of gas utilities, others expressed concern over the potential impact on consumers, particularly those belonging to lower-income brackets.
Other decisions of the cabinet
In addition to the tariff hike, the cabinet also deliberated on several other crucial matters, including:
- Approval for the extradition of Irfan Qadir Bhatti, a dual national accused of involvement in terrorism, to Norway.
- The appointment of Syed Tariq Muhammadul Hassan as the managing director of the Pakistan Baitul MaaL.
- The redeployment of Khan Nawaz as the member finance in the Heavy Industry Taxila.