Future planning: Gas tariff hike put on hold for a month

Rates were to be revised upwards by 50 per cent

ISLAMABAD:

While the Pakistan Tehreek-e-Insaf (PTI) has threatened a nationwide shutdown on December 16, the government has put on hold a proposed increase in gas tariff, fearing the PTI might cash in on the issue to incite street agitation. The government is to increase gas tariff by nearly 50% which includes recovery of Rs49 billion from all but domestic consumers to bail out gas utilities.

Sources told The Express Tribune that the petroleum ministry had tabled a gas tariff increase plan in a meeting of the Cabinet Committee on Energy chaired by Prime Minister Nawaz Sharif on November 21. “The issue was discussed in the meeting and it was agreed that it could be taken up after one month,” a source said.



The Economic Coordination Committee (ECC) had approved policy guidelines for the Oil and Gas Regulatory Authority (Ogra) for recovery of around Rs49 billion from consumers which would cause the average gas price to go up by 30% to bail out gas companies. It will result in an increase in gas prices by Rs35 per million British thermal units (mmbtu).

Following an increase in the Unaccounted For Gas (UFG) ceiling, which covers theft and leakage, from 5 to 7% by Ogra, then headed by Tauqeer Sadiq in 2010, the state-owned gas transmission and distribution firms earned an additional Rs49 billion.

The National Accountability Bureau (NAB), however, termed it a scam and asked Ogra to recover it from gas utilities but the government issued fresh guidelines to pass this burden on to consumers to secure the companies from financial default.

In addition to recovery of old Rs49 billion from consumers, the government would also recover an additional Rs45 billion from consumers to implement the decision of the regulator to meet revenue requirements of gas utilities. The government would have to raise gas tariff by 20% for all but domestic consumers to generate revenue for gas utilities following the regulator’s decisions.

After the proposed 20% increase, gas utilities would generate Rs45 billion from consumers. However, officials said the prime minister did not want to raise gas prices for domestic consumers. Ogra has already approved up to 14% hike in the price for the current fiscal year, 2014-15.

The regulator had also decided to increase the gas tariff for both state-owned gas utilities – SNGPL and SSGCL – for the fiscal year 2013-14 by 12% and 17%, respectively. These two decisions have yet to be implemented.

Published in The Express Tribune, December 2^nd, 2014.