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September 11, 2018

Beware of hanging fire in economic firefighting


September 11, 2018

LAHORE: Delays in economic decisions are always costly for the economy as they keep the businesses in guessing and in most cases are damaging for the national exchequer.

For instance shelving the gas price hike is costing the government Rs427 million daily. The Economic Coordination Committee of the cabinet has deliberated the issue of increasing the natural gas rates in its last two meetings but has deferred the matter for further consultation with the stakeholders.

The fact is that Sui Southern Gas Company and Sui Northern Gas Pipelines Limited are cumulatively incurring an annual loss of Rs156 billion. The loss is because the tariff of gas supplied to consumers is lower than the cost at which these companies get gas from the suppliers. Some loss also occurs due to theft. The Economic Coordination Committee agrees that the gas tariff should be hiked to cover the loss. The cost of delay in implementation of new tariff is Rs427 million daily. Why delays? We should take rational decisions quickly.

The government, it seems, is more concerned about the backlash from domestic consumers. They should look at the ground realities. Those that get piped gas are in minority as the majority of population, most of which is rural, is denied this facility. The monthly average bill of a household using piped gas for kitchen fuel only is Rs200. The cost of kitchen fuel of other kitchen poor users is Rs1000/month. This inequality in kitchen fuel price hits the poorest segment of society. Even if the gas price is doubled the piped gas consumers would still be paying 60 percent less for kitchen fuel than those who don’t have this facility. There is no need for consultation as this is a pro-poor decision that would save Rs156 billion for development. This hesitation of taking right decision should end at a time when Pakistan needs every penny for development.

The government is also contemplating to ban the import of all luxury items like cars, smartphones, and various foods including cheese (that looks like luxury on the basis of the quantum of its imports). Pakistanis can manage without luxury items that consume almost $5 billion in foreign exchange. This decision should be implemented immediately. A month’s delay in decision costs Pakistan $416 million in foreign exchange.

Minister of Railways has announced to donate Rs100 million for dam fund by increasing the rates of passenger tickets by Rs1-10/ticket. This may earn the minister praise in government circles but every sane person would disapprove it as the Railways is operating in huge loss and every penny that it earns through new revenue generation schemes should be used to reduce the deficit. It does not make sense that an institution getting subsidy worth billions from the government doles out paltry Rs100 million to appease the prime minister, who, as it seems, is above such petty tricks. The minister should instead give a handsome amount from his personal wealth.

The economy was not in that bad shape when it was handed over to the caretakers. They unfortunately suspended all economic activities by delaying decisions that needed immediate attraction. This is the reason that the present regime should act quickly with confidence to improve the economic fundamentals. The fundamentals would improve only through prudent but harsh decisions.

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