Gas prices likely to be pushed up 2.8%

Government seeking end to cross subsidy through restoration of GIDC.

ISLAMABAD:

Consumers around the country will soon have to dig deeper into their pockets when gas prices are revised upwards by 2.8%.

The price hike proposed by the Oil and Gas Regulatory Authority (Ogra) is awaiting the prime minister’s approval and is likely to be made effective retroactively from July 2013.

“The petroleum ministry had moved a summary for raising gas prices before Ramazan, but the prime minister had decided to put the price increase on hold till after Eid. Now the government was expected to notify a 2.8% hike in the coming days,” officials said.

The increase will affect all consumers and comes after a decision by the Islamabad High Court against recovery of Gas Infrastructure Development Cess (GIDC) shelved an earlier Ogra plan of increasing gas prices of CNG, fertiliser and captive power plant consumers.

GIDC was the basis for the government’s original plan of ending cross subsidy for different segments of gas consumers. According to the plan, the petroleum ministry had tabled different options to increase gas prices for CNG consumers, fertiliser manufacturers and captive power plants to bring them at par with alternative fuels.

However, gas consumers moved the courts challenging the levy of GIDC. The federal government lost its case after it failed to demonstrate that the Rs40 billion collected under GIDC for gas import projects like IP and TAPI had been spent on the same projects.

Sources said the government had now moved the Supreme Court, seeking a reversal for the earlier decision.

Officials also revealed that Ogra has proposed a slash in the gas price for consumers of Sui Southern Gas Company (SSGC) and a hike in prices for the consumers of Sui Northern Gas Pipeline Limited (SNGPL), effective from July 1.

According to sources, SNGPL and SSGC had originally requested Ogra to raise gas prices for consumers by Rs53 per mmbtu and Rs32 per mmbtu, respectively. The increase was meant to recover Rs14 billion in revenue lost on account of gas theft and to cover Rs10 billion needed to launch different LPG projects.

However, after holding public hearings, Ogra allowed SNGPL to raise gas prices by just Rs8.72 per mmbtu and slashed SSGC’s current gas prices by Rs12.12 per mmbtu.

Published in The Express Tribune, August 19^th, 2013.