Interference by Government in Gas Market is Unconstitutional

Afghanistan Chamber of Commerce and Industries announced at a press conference today that recent efforts by Ministry of Commerce and Industries (MoCI) to fix the price of gas and the closing of several gas import companies, is against provisions 10, 11 and 13 of Afghan Constitution.

The press conference was attended by Mr. Khan Jan Alkozay, First Vice-Chairman, Mr. Mohammad Younus Momand, Vice-Chairman for Commercial Affairs, Mr. Baz Mohammad, Vice-Chairman for Industries and Mines, Mr. Mahmoud Karzai, Senior Advisor of ACCI as well as owners of gas import companies.

MoCI has assigned 55 AFN as the price of 1 liter of gas.  The Ministry has informed gas companies to sell gas at this fixed price.  The penalty for not complying is closure of their business.

Mr. Alkozay called “unexpected” the current conditions in country. He asserted that supply cannot meet demand and as a consequence, the price of gas is high.  Mr. Alkozay asked that the government plan for these contingencies by establishing a strategic reserve to be used during periods of tight supply.  He further reiterated that the government should consult with ACCI before taking the questionable step of shutting companies down without a court order.

The First Vice-Chairman cautioned that government interference in Afghanistan’s fledgling market economy was closely watch by investors and that such action would impede investor confidence and roll-back the many years it took to build up interest in Afghanistan.

Mr. Alkozay explained that the reason for the tight supply of gas was due to external reasons.  He said that internal demand in the last 6 months in both Kazakhstan and Uzbekistan meant that that export of gas to Afghanistan from these countries was limited. Additionally, Afghan-bound gas tanker trucks were transiting very slowly from Turkmenistan also in the last 6 months.  The combination of events created pent-up demand and he asked the government to quickly find a solution.

Following his remarks, Mr. Momand mentioned his meeting with Minister of Commerce and Industries where it was agreed that the profit mark-up for gas supplied to Afghanistan was to be limited to one-percent for expenses to transport gas up to the country’s borders.

Mr. Mahmoud Karzai underscored that the use of subsidy was the main solution for the government to bring the price down.  “Government would purchase gas from the private sector and then sell it to people at a subsidized price,” said Mr. Karzai.  He lamented the fact that governments do not fix prices for goods in the vast majority of countries yet the Afghan government sees fit to do so.

Separately, Mr. Karzai highlighted a continuing problem related to access to loans.  He said that without access to credit, the growth of the private sector would be restricted. Mr. Karzai wondered why nothing was being done and said that such issues should be considered together with expenses related to taxation, fees, and security that have added to the cost of doing business.

Recently, the price of gas has increased rapidly in little over a month from 50 AFN to 90 AFN per liter.  With winter approaching, higher prices are hurting the people and is a serious challenge facing the government.