By Staff Reporter
ISLAMABAD: Caretaker government said on Friday it will increase gas prices for all consumers, a move that could add to the economic hardship of millions of people and stoke inflation that’s already near 30 percent.
The government said the gas price increase was necessary to reduce the growing circular debt in the gas sector, which had reached Rs2.7 trillion rupees as of June.
“The gas sector was losing Rs350 billion per year, and the government could not afford to subsidize it any longer,” Muhammad Ali, the caretaker minister for power and petroleum, said at a news conference.
Ali said the government would have to rationalize the gas prices across the board to avoid a $3.5 billion loss that the country suffered from declining domestic exploration and production of oil and gas.
He did not say how much the gas prices would increase or when the new rates would take effect.
The gas price increase could hurt millions of Pakistanis as it could further fuel inflation, which has been hovering around 30 percent for months, and erode the purchasing power of consumers.
The inflation rate stayed above target at 27.4% in August, as authorities said reforms linked to the IMF loan complicate the task of keeping price pressures and declines in its rupee currency in check.
The South Asian nation is struggling to revive its economy under a temporary administration after securing a $3 billion loan program from the International Monetary Fund (IMF) in July that averted a sovereign debt default.
The IMF bailout came with tough conditions, including removing subsidies and imposing new taxes, that have fueled inflation and weakened the currency.
The gas price increase could hurt millions of Pakistanis as it could further fuel inflation and erode the purchasing power of consumers. Authorities have frequently raised fuel and electricity prices during the year, sparking protests and anger among ordinary people. At least two dozen people were killed in stampedes for food aid across the country in April.
Minister Ali also announced some measures to boost the power sector, which is also plagued by debt and inefficiency.
He said the government would offer lower tariffs for industries that increase their electricity consumption in winter, when demand drops significantly.
The government would directly supply power to industries from power plants through wheeling charges, which would reduce the losses in capacity payments due to low utilization.
“The government also discussed ways to improve theft control and governance structure in distribution companies (DISCOs), as well as their privatization or provincialization,” Ali said. “The first step is to strengthen the boards and management of DISCOs and create a mechanism for direct power supply to industries.”
Ali said the gas exploration sector faced problems due to security and price issues, as well as debt.
“Many exploration companies had left the country in the last 13 years and now the country is dependent on imported LNG (liquefied natural gas) to meet its needs, especially in winter.” A proposal for dividends to deal with the gas sector debt was under discussion with the IMF.”
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