Gas tariff may go up by 50%

Hike expected to be announced next week

ISLAMABAD:

The prices of gas is expected to increase by more than 50% next week following the International Monetary Fund asking the caretaker government, which has apparently decided to pass on the losses in this sector to the people, to jack up its rate.

The annual loss of the gas sector is Rs350 billion while its total circular debt has hit Rs2.70 trillion.

According to sources, the tariffs of Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) will be increased by Rs415 per mmbtu and Rs417 per mmbtu respectively after the price hike.

The Oil and Gas Regulatory Authority (Ogra) has already given the nod to the gas price increase.

The sources said Ogra had sent its final approval to increase the gas rates to the federal government.

The difference in the import tariffs for liquefied natural gas (LNG) and natural gas will also be eliminated.

According to the IMF agreement, the increase in gas prices will be effective from July 1, 2023.

The energy ministry will issue an official notification about the hike in rates.

The IMF recently granted Pakistan permission to extend the payment of electricity bills for consumers using up to 200 units over three months. In exchange, Pakistan had to announce an increase in gas prices by 50% effective from July and a crackdown against electricity theft.

The Washington-based lender conditionally approved the gradual payment of August’s electricity bills over three months for consumers not eligible for subsidies and using up to 200 monthly units.

Lifeline consumers and those within this consumption bracket, who are protected from price hikes, will not be eligible for this temporary relief.

As a result, only around four million consumers, around 10% of the total, will be eligible for this assistance. The government had initially requested permission to allow installed payments of bills for consumers using up to 400 monthly units, which would have benefited 32 million consumers or 81% of the total, but this request was turned down by the IMF.

The sources said the IMF had also called for the implementation of the weighted average cost to fully recover imported gas prices from the consumers.

This will involve calculating the gas price by considering the rates of both the imported LNG and local one. Then an average rate of gas will be determined and consumer-specific prices set accordingly.

Pakistan has already launched a crackdown on electricity theft, aiming to reduce technical and commercial losses faced by power distribution companies.

Interim Energy Minister Mohammad Ali emphasised the importance of curbing theft and unpaid bills, citing an annual loss of Rs589 billion because of these issues.