Gas tariff: Minister urges upward revision for domestic consumers

Says utilities need to be bailed out, households need to pay more.

Zafar Bhutta November 20, 2014

ISLAMABAD: Amid the ongoing power crisis, Petroleum Minister Shahid Khaqan Abbasi has urged the country’s prime minister and the cabinet to raise the gas tariff for domestic consumers.

Abbas, in a briefing to the cabinet in its meeting held on October 31, said the tariff for domestic consumers was low and it needed to be revised.

“Since the domestic gas for consumption is very cheap, the prices need to be revised,” Abbasi said in the meeting which was chaired by Prime Minister.

The government is currently working on a plan to increase the gas tariff by 20% for all consumers, barring domestic users, to generate enough revenue for gas utilities.

After the 20% increase, gas utilities would generate Rs45 billion from consumers.

However, officials said the country’s premier was not willing to burden household consumers by increasing the tariff.

Oil and Gas Regulatory Authority (Ogra) has already approved up to a 14% hike in the tariff for the ongoing fiscal year, 2014-15.

Additionally, it has decided to increase the gas tariff of both state-owned gas utilities – SNGPL and SSGCL - for the fiscal year 2013-14 by 12% and 17% respectively.

“If gas prices are not increased for domestic consumers, other consumers of CNG, such as industry, captive and power sectors would bear more burden by facing over Rs41 billion to cross-subsidise domestic consumers,” officials said.

The Unaccounted for Gas (UFG) of SSGCL has been set at 7% subject to decision on a stay order by the Sindh High Court, while UFG of SNGPL has been fixed at 4.5% for 2013-14.

Pending problems

The government was to increase gas prices twice this year, on January 1 and July 1, 2014 but it faced delays as they failed to recover money amounting to Rs49 billion.

Officials said the proposed increase of 20% would enable the companies to generate Rs45 billion from the consumers.

They said that the government also wanted to increase tariff for the consumers by issuing policy guidelines to Ogra, a move that would bail out gas companies on the brink of collapse.

Following an increase in the UFG ceiling, which covers theft and leakage, from 5% to 7% by Ogra, state-owned gas transmission and distribution firms earned an additional Rs49 billion. National Accountability Bureau (NAB), however, termed this amount as a scam.

The policy guidelines, proposed by the Ministry of Petroleum and Natural Resources to bail out gas distributing companies, may also push up gas prices by Rs35 per mmbtu.

Published in The Express Tribune, November 21st, 2014.

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