Politically destabilising inequalities
December 18, 2020
LAHORE: Uptick in exports is based on subsidised power and gas, which shows that instead of reducing cost of doing business by improving public sector inefficiencies, the government is booting the additional bill of the already bleeding power sector.
The cost of imported RLNG is much higher (30-40 percent higher) than the rate at which the gas is supplied to the exporters. This is a fire fighting measure and the sustainability of exports is subject to continuity of these subsidies.
It goes without saying that subsidies undermine the competitive process as they interfere with market signals and where provided on inputs lead to inefficient allocations as perceived prices deviate from cost-based prices.