The Ministry of Petroleum on Friday proposed a massive cut in gas prices for domestic consumers: a whopping 18 to 51.7%, effective from July 1.
The drastic move appears to be political in nature with the government attempting to win popular support before the next general elections – which could take place as early as the end of this year.
On the other hand, the ministry, in its proposal sent to Prime Minister Raja Pervaiz Ashraf, has suggested increasing gas tariff by 10.3% for industry that uses gas for electricity generation, including captive power, Wapda, KESC, Generation Companies and independent power producers (IPPs). The move would, in turn, enhance the cost of doing business for industry and also raise tariffs for power consumers.
No change in price has been proposed for commercial consumers and, most notably, fertiliser plants that use gas as their main raw material.
According to the proposal, the tariff for domestic consumers using up to 100 cubic meters per month should be reduced by 18.7% to Rs100 per million British thermal unit (mmbtu, or simply ‘unit’) from Rs122.95 per mmbtu. Those using up to 300 cubic meters per month should be reduced to Rs200 per unit from Rs245.89 per unit. Households consuming over 300 to 500 cubic meters of gas per month would enjoy a cut in gas prices by 51.7% to Rs500 per unit from the existing Rs1,035.34 per unit. The gas price of bulk domestic consumers using over 500 cubic meters per month would be increased by 0.8 % to Rs500 per mmbtu from existing Rs496.21.
The ministry is seeking approval from the prime minister to cut the price of CNG in region-1 (which consists of K-P, Balochistan and the Potohar region) by 7.7% to Rs759.55 from the existing Rs822.53, including Rs141 per mmbtu cess, and 8.3% for region-2 (which consists of Sindh and Punjab) to Rs697.55 from Rs760.53, including Rs79 per mmbtu cess.
The ministry has proposed to revise upwards the gas rate for the power generation industry, captive power plants and independent power producers (IPPs) by 10.3% from existing Rs507.86 to Rs560 per mmbtu, including Rs100 per mmbtu cess. The petroleum ministry is seeking a hike in Gas Infrastructure Development Cess (GIDC) to Rs100 per mmbtu for the power generation industry. At present, captive power plants are paying Rs13 per mmbtu cess, Wapda, KESC and Generation Companies like Hesco and Lesco are paying Rs27 and IPPs Rs70 per mmbtu cess.
Published in The Express Tribune, June 30th, 2012.
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