APTMA fully supports the government’s decision on gas/RLNG pricing reforms. This was necessary to ensure long-term sustainability of Pakistan’s gas sector, which was on the verge of collapse and has run up a circular debt of nearly Rs. 3 trillion. Additionally, this reform unlocks export potential and drives positive sentiment for textile exporters as exports of goods in October 2023 were already up by $639 million, compared to July 2023.
Reforms in gas/RLNG pricing will help ease the burden of the textile industry’s crisis by allowing the government to ensure an adequate supply of gas/RLNG throughout the country. This reform will also provide much-needed certainty as to the availability of gas/RLNG and provide exporters with a forward-looking view regarding the processing of export orders.
Revised pricing and availability ensure maximum utilization of production capacity and export potential. Moving forward we expect exports to increase by as much as $700 million per month due to the removal of inter-province discrimination and provision of a level playing field to old industrial units and new units that have been set up during the last 3 years. An additional $300 million per month in exports can be achieved if cross subsidies of Rs.10.84 are removed from power tariffs for industrial consumers.
Distortions in gas/RLNG pricing over the years have caused several issues across the economy, including a slowdown in large scale manufacturing and exports, drying up of investment in new gas field exploration and premature depletion of existing gas fields. They have had further negative implications for the overall fiscal and current account deficits and other macroeconomic indicators.
In the absence of these reforms both SSGC and SNGPL were being forced towards bankruptcy and suspension of several critical operations. Removing distortions in gas/RLNG prices will also incentivize fresh investment in gas field exploration activities that will, overtime, ease the indigenous gas shortage, and help ease Pakistan’s balance of payments and external debt difficulties by reducing dependency on imported energy.
We are extremely thankful to the Caretaker Prime Minister Mr. Anwar ul Haq Kakar, Minister for Commerce Dr. Gohar Ejaz, Minister for Energy Mr. Muhammad Ali and Minister for Finance Dr. Shamshad Akhtar, as well as the entire Economic Coordination Committee for their continued efforts to support Pakistan’s export industry and move the country towards economic growth and prosperity.
We hope that the government will follow up on gas reforms by implementing reforms in the power sector to allow export-oriented units to benefit from competitive electricity prices.