Over 300% raise in gas tariff proposed

Ogra recommends 45% increase in gas prices for consumers of the SNGPL and the SSGCL

ISLAMABAD:

The government may increase gas tariff for the domestic consumers by more than 300% to meet the revenue requirement of the gas utilities for the ongoing financial year, 2022-23, sources said on Wednesday.

Earlier, the Oil and Gas Regulatory Authority (Ogra) had allowed 45% increase in the gas prices for the consumers of two gas utilities-the Sui Northern Gas Pipeline Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL).

The regulator had forwarded its decision to the federal government to notify the revised rates. Prime Minister Shahbaz Sharif is expected to take the final decision regarding increase in the gas prices for the consumers.

Read: Ogra takes notice of LPG mafia

The sources said that the government recently held consultation to finalise some proposals to pass on the increase in the gas prices to the consumers. They added that no increase had been suggested for domestic consumers falling in slab 1 at Rs173 per mmbtu.

However, there is a proposal to jack up the tariff by 43%, from Rs121 to Rs173 per mmbtu, for consumers in slab 2, while maintaining the current rate of Rs300 per mmbtu for the consumers in slab 3.

The consumers falling in slab 4 may face a 26% increase, from Rs553 to Rs696 per mmbtu; a 151% rise , from Rs 738 to Rs 1856 per mmbtu for slab 5 and a massive jump of 353%, from Rs1,102 to Rs3,712 per mmbtu for consumers in slab 6.

Besides, commercial roti tandoors may also face an increase in gas tariff – from Rs697 to Rs928 per mmbtu. According to the sources, if the increase was announced, the price of roti would also increase.

The sources said that the proposed prices were still lower compared to the prices of liquefied petroleum gas (LPG). The LPG was considered fuel for the poor, who were paying double the price paid by those using piped gas.

Meanwhile, the Pakistan LNG Limited (PLL) had failed to secure liquefied natural gas (LNG) cargoes to meet domestic requirements in the wake of the approaching winter. The Pakistan State Oil (PSO) is an importer of the LNG, mainly from Qatar.

Read: OGRA raises gas prices by 45 per cent

During the last winter season, the government diverted expensive LNG to the domestic consumers. The gas utilities failed to recover price of expensive LNG due to the absence of a legal framework. It resulted into the piling-up of gas bills.

In the past, power sector was used to be key defaulter of the gas bills. But the SNGPL had now become a major defaulter of the PSO, owing Rs311 billion on account of LNG supply.

The previous Pakistan Tehreek-e-Insaf (PTI) government had passed the weighted average cost of gas bill from parliament to recover the full cost of the LNG from the domestic consumers. The bill was challenged in the Sindh High Court (SHC).

All gas producing provinces have been opposing the implementation of theweighted average cost of gas price. Punjab is a major user of LNG. The other three provinces had said that they could not subsidise the consumers in Punjab.

Historically, the prices of gas are still lower in Pakistan. The government has been giving subsidy on gas to fertiliser and captive power plants in the textile sector, including some other export-oriented sectors. A cross subsidy formula is in place for other sectors.

Meanwhile, Ogra okayed the 45% increase in gas prices against the utilities’ demand for 198% hike. The increase will help the SNGPL meet its Rs260.9 billion revenue requirement, while the SSGC will recover Rs285 billion from gas consumers through revised gas prices.

Ogra said in its decision that the financial impact of the previous year’s shortfall of Rs264.8 billion that accounted for Rs720.20 per mmbtu had been referred to the federal government for an appropriate policy decision. Therefore, it had not been made part of the determination.

The regulator also allowed the SSGC to increase gas prices by 44% in order to meet its revenue shortfall for the year 2022-23. The gas company had sought an increase of 45%. Through this determination, Ogra requested the federal government for advice on category-wise sale prices.