Government likely to increase gas prices by up to 86%

Price revision is aimed at bailing out gas utilities which face financial default

ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government is likely to increase gas prices by up to 86% in an effort to bail out public utilities, which are on the verge of financial default following delay in notifying revised gas prices.

The former Pakistan Muslim League-Nawaz (PML-N) government had kept gas prices unchanged for a long time on political grounds, which worsened financial situation of the gas utilities - Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL).



Officials told The Express Tribune that gas transmission and distribution companies could halt operations due to the growing circular debt as well as unchanged gas prices and the present government was expected to revise prices upwards to support the utilities.

Economic managers are likely to take this decision in a meeting of the Economic Coordination Committee (ECC) scheduled for Wednesday. According to officials, the Ministry of Energy (Petroleum Division), in a summary, has proposed a 30% across-the-board increase in prices for all gas consumers - commercial, industrial and power consumers - except for domestic users.

However for the first slab of domestic consumers, the division has recommended 86% increase in gas prices.



At present, the gas price for the first slab of domestic consumers is Rs110 per unit against the actual price of Rs630 per unit. This way, the consumers are getting a cross-subsidy of Rs520 per unit. The previous government had constituted a sub-committee of the ECC which finalised the mechanism for revising gas prices upwards.

Average gas purchase price for SNGPL from 40 different sources is Rs630 per million British thermal units (mmbtu) whereas its average sale price is Rs390 per unit. This shows a difference of Rs240 per unit which is the main reason behind the rising corporate debt level.

On August 20, 2018, SNGPL’s payables stood at Rs171.1 billion including mark-up of Rs28.9 billion whereas its receivables amounted to Rs165.01 billion.

Of this amount, Rs10.4 billion was to be paid by the Water and Power Development Authority (Wapda) and independent power producers (IPPs) for receiving liquefied natural gas (LNG) supply.

On the other hand, SSGC’s receivables stood at Rs203.6 billion, of which Rs83.5 billion was against K-Electric, Rs55 billion against Pakistan Steel Mills, Rs13.9 billion against SNGPL (uniform price), Rs3.91 billion against SNGPL (net), Rs3.53 billion against Wapda (JPCL/CPGCL), Rs25.2 billion in sales tax recovery and Rs18.4 billion in income tax recovery.

SSGC was to pay Rs69.8 billion to Oil and Gas Development Company, Rs43.4 billion to Pakistan Petroleum Limited and Rs35.6 billion to Government Holdings Private Limited. It total payables to gas suppliers amounted to Rs148.8 billion.

Published in The Express Tribune, August 29^th, 2018.

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