No change in gas prices for tandoors
Gas price for the power sector, including IPPs, has been increased from Rs824 to Rs857 per mmbtu, which will result in a hike in power tariff for consumers. PHOTO: FILE
The Oil and Gas Regulatory Authority (Ogra) has left unchanged gas prices for tandoors and domestic consumers.
The Pakistan Tehreek-e-Insaf (PTI) government has come in for heavy criticism from opposition parties due to mounting inflation. However, it did not cut gas prices for roti tandoors and residential consumers.
According to a notification issued by the regulator, the gas price for roti tandoors has been kept unchanged at Rs110 per million British thermal units (mmbtu) for consumers falling in first slab. For the higher slab the price will stay at the previous level of Rs700 per mmbtu.
However, Ogra has notified a hike in gas prices for other sectors like compressed natural gas (CNG) outlets, power producers, general industry and export-oriented industry.
The regulator notified no increase in the gas price for commercial consumers and the sector would continue paying Rs1,283 per mmbtu. The gas price for general industry has been raised from Rs1,021 to Rs1,054 per mmbtu.
Gas price has been increased to Rs1,350 per mmbtu for CNG stations in region-2 and to Rs1,371 for region-1 against Rs1,283 previously.
The government has made no increase in the gas price for cement sector and has maintained the rate at Rs1,277 per mmbtu.
Earlier, the government had announced a package for the real estate sector to boost economic activity amid the Covid-19 outbreak. The decision to keep gas prices unchanged for the cement sector is aimed at providing relief to the real estate sector.
Gas price for major export-oriented industries and captive power plants has been raised from Rs786 to Rs852 per mmbtu while gas rate for the general industry has been hiked from Rs1,021 to Rs1,054 per mmbtu.
The government is currently giving a subsidy to the export-oriented industries and the increase in gas prices will reduce the burden on national exchequer.
The price of gas used as feedstock by old fertiliser plants has been increased by only Rs2 from Rs300 to Rs302 per mmbtu. On the other hand, the gas price for new fertiliser plants has been left unchanged.
Gas price for the power sector, including independent power producers (IPPs), has been increased from Rs824 to Rs857 per mmbtu, which will result in a hike in power tariff for the consumers.
Earlier, the regulatory authority had turned down a demand of gas utilities - Sui Northern Gas Pipelines (SNGPL) and Sui Southern Gas Company (SSGC) - to make a hefty increase in gas prices. The regulator decided to slash the prescribed gas prices by up to 6%.
In a decision sent to the federal government, Ogra had recommended to slash prices for SNGPL and SSGC consumers by 6% and 2% respectively for financial year 2020-21.
However, the government decided to maintain gas prices for domestic consumers. It also kept unchanged the price for roti tandoors and made increase for other consumers. Following this decision, the gas utilities will receive Rs40 billion worth of surplus from the gas consumers. The revenue requirement of the two gas utilities was calculated at Rs472 billion but they would receive Rs512 billion in revenue in financial year 2020-21 based on the revised gas prices.
Topline Securities said gas prices for fertiliser feed and fuel had been increased by just 0.7% and 0.2% respectively, which would push up the cost of urea production by Rs3 per bag. Fertiliser manufacturers will pass on the impact of higher gas prices to the consumers.
Gas price has been increased by 6.5% for captive power plants, which will have a negative impact of 2-5% on earnings of chemical and select cement companies.
Gas price for the export-oriented industries has been increased by 8.4%. South-based textile companies like Gul Ahmed and Feroze Mills were larger consumers of natural gas. It would have a negative impact of 3-5% on profits of these companies, the research house said.
For steel companies, like International Steels and Amreli Steel, this will have a slightly negative impact of 1-3% on their earnings. For Sui companies, this will be a slightly positive development as their overall collection will improve.
Published in The Express Tribune, October 27th, 2020.
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