As if previous gas bombs weren’t enough to solve the problem, the caretakers hiked gas prices again last week in an effort to entice the International Monetary Fund (IMF).
Increases in domestic gas tariffs have been the primary factor driving up energy prices over the past three months, which have been steadily climbing since last year.
The catalyst for this change was the importation of expensive gas from partner nations and the persistent elimination of fuel subsidies, which maintained costs lower than those of surrounding nations but higher than worldwide trends.
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There has been an immediate reverberation of impacts since December 2023. For consumers without protection, the cost of gas has increased by a factor of five, going from about Rs. 8,000 in November to over Rs. 40,000 and higher.
Gas circular debt and the new demands of obtaining another IMF program in April are likely to drive up fuel prices considerably more next month. Pakistan is aiming for a $10 billion program, which is much larger than the $3 billion bailout that will expire next month. Greater debt translates to greater energy rates.
A wide range of consumers have felt the effects of the most recent price increase. Homes with low incomes are likely to feel the effects the most, with residential users experiencing up to 70%.
There will be no change for commercial consumers, but there will be increased charges for bulk consumers, like factories and fertilizer plants.
Strugle of Industrial sector due to Ex[ensive gas:
The industrial sector is already struggling under the weight of cross-subsidies; therefore, there are concerns about its competitiveness. Stopping the blatant discrimination between exporting and non-exporting sectors and focusing on captive users are the main goals of the increase.
The government is currently pushing for consistent pricing in the fertilizer manufacturing industry, especially for urea production, in an effort to alleviate pricing inequalities. Some fertilizer companies may gain immensely from the price increases and reap windfall profits, and there is no control over their pricing tactics, thus raising doubts.
Many believe that the new gas cost hike will have a positive impact on fertilizer companies like Fauji Fertilizer Bin Qasim and Engro Fertilizer, but other market factors such as farmer turnover and earnings may see significant negative effects.
On a separate note, businesses that depend on gas supplies from Mari Petroleum are especially vulnerable to the unknown future of possible price revisions related to gas supply costs.
Gas Pricing should e improve by Government:
The government should improve the pricing system and prevent some corporations from abusing it in order to achieve the International Monetary Fund’s goal of reducing circular debt.
There have been requests for more stringent oversight of the profit margins of fertilizer businesses. Reduce the inflationary pressure on food prices by ensuring that farmers receive the advantages of reduced gas prices through the establishment of a set gross margin system.
An additional consequence of the gas rate increase is a significant increase in the cost of fertilizer, which may cancel out the benefits of the soon-to-be-enacted reduction in inflation.
Energy tax bombs detonate in both directions. The timing is terrible, and the most helpless people aren’t getting any assistance. The pace is too high.
Energy and fuel prices are rising at an alarming rate as the current caretakers prepare to make way for a new federal government. None in Pakistan is ready for this, and none has thought out how to protect the most helpless people in their community.
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