Re-election chances: Gas price hike delayed on poll drubbing fears

ISLAMABAD:

In response to ruling and allied parties’ fears that an increase in gas prices may harm their chances in the upcoming elections, the Economic Coordination Committee is likely to postpone the implementation of a proposed four per cent price hike until after the next government assumes power, The Express Tribune has learnt.

According to ECC insiders, the proposed price hike aims to pass a Rs200 billion burden onto consumers following an increase in the wellhead price of Qadirpur gas field – Pakistan’s fourth largest gas field.

“Since Qadirpur accounts for a quarter of the country’s total gas production, the hike in the field’s wellhead price will raise gas prices for consumers by four per cent,” they quoted Petroleum Secretary Dr Waqar Masood as saying.

The plan has prompted swift opposition from all sitting federal ministers, the sources told The Express Tribune.



“With the general elections expected to be held in the next four months, any increase in gas prices will turn voters against the Pakistan Peoples Party and its allies,” they quoted the ministers as saying.

In a bid to allay the ruling and allied parties’ concerns, ECC has decided that the government will announce the proposed hike in January next year and implement it later in July, well after the elections, the sources added.

Controversy surrounding the hike

The proposed four per cent hike in gas prices is not without its share of controversy either.

Sources told The Express Tribune that an irregular clause in Qadirpur gas field’s gas pricing agreement (GPA) is responsible for the increase in its wellhead price. The clause, which was inducted by certain petroleum ministry officials, binds the government to increase gas prices in case the price of high sulphur furnace oil (HSFO) exceeds $200 per ton.

According to them, ECC approved the controversial clause in a recent meeting even though the Petroleum Secretary admitted its irregular nature before the economic body. The decision is responsible for placing the additional Rs200 billion burden on consumers.

At present, the provisional price of gas from Qadirpur field is $2.56 per million British thermal units (mmbtu). However, the price is expected to touch $3.01 per mmbtu once HSFO prices reach $400 per ton.

Consumers are also likely to face another $1 increase in the price of gas from Qadirpur field in the near future as well.

“Under the GPA, the price of gas must be increased to a maximum of $4 per mmbtu,” Dr Masood informed the ECC.

Published in The Express Tribune, December 14^th, 2012.