ISLAMABAD: Prime Minister Nawaz Sharif and his cabinet colleagues are divided over a proposed substantial increase in gas tariff from next month under an agreement with the International Monetary Fund (IMF).
Petroleum Minister Shahid Khaqan Abbasi announced last week that the prices for all consumers, except domestic users, would be increased.
According to an official, the government’s economic team led by Finance Minister Ishaq Dar presented last week the proposal to the prime minister but he declined to approve it. The prime minister strongly opposed the proposal, the official said.
The prime minister is reported to have said that the government was already facing severe criticism over the general price hike, particularly of electricity, and it would not be advisable to increase gas tariff when its supply to most of the consumers was being reduced because of shortage.
Sources said the prime minister had been informed by the industrial, fertiliser and CNG sectors about the adverse impact of gas tariff increase on the production cost.
More importantly, the industrial sector conveyed to the prime minister that the grant of the status of Generalised System of Preferences Plus (GSP Plus) by the European Union would be of no benefit if the industry was not able to increase production and control costs.
The textile sector particularly wanted continuation of maximum gas supplies even in the winter, instead of a price shock.
The sources said the prime minister had also received reports that the CNG sector was already planning a protest campaign which could be joined not only by people losing jobs in the sector but also by opposition parties, particularly the PTI which was already capitalising on public resentment.
The forthcoming local government elections, particularly in Punjab, were also a serious matter and hence the government might decide to increase the tariff in two phases, an official said.
The sources, however, said the economic team persists in its demand for gas tariff increase because of international commitments. The government has two weeks to take a final decision and the economic team may continue to try to persuade the prime minister to meet the commitment made to the IMF.
An official said the petroleum minister was perhaps unaware of the prime minister’s refusal to allow the increase.
The ministry of finance had given an undertaking to the IMF as part of the $6.64 billion Extended Fund Facility to generate about Rs100 billion from gas prices through imposition of a levy.