The Karachi Chamber of Commerce & Industry (KCCI) and all seven industrial town associations of the city, while unanimously terming the extortionate hike in gas tariffs for export-oriented and general industries as ‘unviable, unacceptable & unfeasible’, vociferously appealed Prime Minister and his cabinet not to accept ECC’s decision of such a huge increase in gas tariffs and consider bringing gas tariffs to a level where these become viable and absorbable so that the wheels of industries in Karachi keep spinning.
In a joint statement issued, the Karachi Chamber, Site Association of Industry, Korangi Association of Trade & Industry, North Karachi Association of Trade & Industry, Landhi Association of Trade & Industry, Federal B. Area Association of Trade & Industry, Bin Qasim Association of Trade & Industry and Site Superhighway Association of Trade & Industry also termed the unbearable hike in gas tariffs as “last nail in the coffin” because more than 90 percent of export-oriented industries and general industries in Karachi would not be able to bear this shock and close down, which would bring down the exports and local production to zero and prove devastating for the already ailing economy.
They pointed out that gas tariff for export-oriented industries has been raised by 86 percent to Rs2050 per MMBtu while for general industries, it has been enhanced by 117 percent to Rs2600 per MMBtu but this was not the end of the story, as 10 percent more will further be added in gas tariff as blended cost of RLNG, which would take gas tariff for export-oriented industries to around Rs2300 per MMBtu, leading to huge downward revision in Pakistan’s exports by rendering our goods uncompetitive in the world markets. It is worth mentioning that rates recommended by OGRA were much lower than the ECC recommended rates.
There was absolutely no possibility that the industries in Karachi would be able to carry on their production activities with such exorbitant gas tariffs, hence, the policymakers must realize the gravity of the situation and shun ECC’s decision so that the industries and the economy could be saved from plunging into further crises and reaching to a point of no return, they added.
KCCI and Industrial Town Associations further mentioned that the value-added textile industries and many other industries in Karachi were tuned to gas and there was absolutely no room for any other fuel except gas whereas in SNGPL’s territory, the industries have huge spaces available where they can easily store fuels in large quantities other than gas. In this scenario, the industries in Karachi would be the greatest sufferers as unabsorbable hike in gas tariffs would put their survival at stake in addition to threatening 54 percent of country’s exports being done by the business community of Karachi alone.
They also noted that although the lawmakers have repeated from time to time that the gas tariff would be charged as per cost and it should be clear that the industries also want to pay what was actually due i.e., the cost of gas but it was purely beyond business community’s understanding that why they are overburdened with other front loadings like cross-subsidy, Unaccounted for Gas (UFG), pilferages and line losses etc.
They further questioned that why the industries were subjected to a mammoth increase of 127 percent when gas tariffs for domestic as well as fertilizer sectors have also been raised. It appears that the government wants the industries in Karachi to close down forever as it was impossible for export-oriented industries to pass on impact of gas tariff hike from Rs1150 to Rs2300 to international buyers of Pakistani goods who would not even bother to have a look at our expensive products and quickly drift towards our regional competitors offering similar products at a much cheaper rates which means Pakistani exporters will soon be kicked out of the international export arena.
Highlighting the hardships to be faced by general industries who have been endangered to Rs2600 gas tariff, they said that it seems that the government has completely forgotten that the import-substitution industries were also very important to reduce imports of the country. The general industries are suppliers of semi-finished goods to exporters, and they are already burdened with an 82 percent increase in the cost of electricity and now the upsurge in gas tariff would lead to closure of 90 percent of non-export industries, resulting in triggering massive unemployment and rise in imports.
They feared that the alarming situation triggered by the hike in energy tariffs would prove detrimental for several initiatives taken by the government to attract investments and promote industrialization, particularly the most recent Special Investment Facilitation Council (SIFC), which is a very good initiative but it may not prove successful as it is actually the local industries who may opt to diversify their businesses under SIFC but if they see their existing businesses going down the drain why would anyone even think of diversifying businesses as it would be totally unviable and problematic to enter into any other businesses under SIFC.
They also appealed Prime Minister to give time for a meeting so that the business community of Karachi could present the real case, besides alerting the government about the likely repercussions of gas tariffs hike.