High-level meeting: Decision on gas price increase likely today

Fertiliser and power sectors, domestic consumers may be exempted

ISLAMABAD:

The government is set to finalise the plan of gas price increase at a high-level meeting slated for Tuesday in an effort to help gas transmission and distribution companies steer clear of financial trouble.

Different proposals were being studied in order to pass the increase in gas prices on to consumers. A proposal seeks exemption for fertiliser manufacturers, power plants and domestic consumers.

“Industrial units and captive power plants may have to pay higher gas tariffs,” said Petroleum and Natural Resources Minister Shahid Khaqan Abbasi while talking to The Express Tribune.

If gas prices were upped for fertiliser plants, he said, it would affect farmers whereas high gas tariffs for power producers would eventually be passed on to domestic consumers.



Now, he added, only the industry and captive power plants were left which would pay higher charges on gas consumption. The industry was generating electricity from captive plants, therefore, it should bear the increased cost of gas, he stressed.

According to officials, the Ministry of Petroleum in another proposal has recommended to the prime minister to introduce a uniform gas tariff for all consumers in order to bring to an end the cross-subsidy system.

According to the proposal, the ministry has suggested exempting the domestic consumers falling in the first two categories. Prices for all other domestic consumers will be increased.

At present, the domestic consumers pay Rs106.14 per million British thermal units (mmbtu) on consumption of up to 100 cubic metres per month, Rs212.28 per unit on consumption of up to 300 cubic metres per month and Rs530.69 per unit for consuming more than 300 cubic metres per month.

The ministry has recommended that the price should be increased to Rs750 per unit except for the first two slabs.

Feedstock gas price for fertiliser units on the Sui Northern Gas Pipelines Limited (SNGPL) network is Rs123.41 per mmbtu while the gas used as fuel costs Rs488.23 per unit. The ministry wants to raise the feedstock price to Rs200 per mmbtu.

Gas price for all commercial consumers is Rs636.83 per mmbtu and for ice factories it is Rs636.83 per unit. The tariff for industrial consumers and power stations of Wapda, K-Electric, independent power producers and captive plants is Rs488.23 per unit.

The petroleum ministry has recommended an upward revision in gas prices to Rs750 per mmbtu for all commercial, industrial and power sector consumers.

In January, the government had planned to increase gas prices but bowed to the pressure from opposition senators in the Senate, who warned of staging a sit-in if the plan was pushed ahead.

Petroleum Minister Abbasi told the Cabinet Committee on Energy on February 12 that SNGPL and Sui Southern Gas Company (SSGC) could not sustain losses of billions of rupees because of low tariff and may collapse any time.

He asked the prime minister to raise the tariff but the premier put off the decision until April and called for coming up with fresh proposals.

The minister proposed a small tariff rise for the first two slabs of domestic consumers consisting of low-income groups and a higher increase for the rest of the categories.

The Oil and Gas Regulatory Authority (Ogra) on July 3, 2014 approved a tariff increase of Rs58.29 per mmbtu for SNGPL and Rs22.90 per mmbtu for SSGC for the current fiscal year. Under that arrangement, SNGPL was to collect Rs37 billion from gas consumers in a year to meet its revenue requirements and SSGC was to collect Rs30 billion.

Under Clause 8 of the Ogra ordinance, the Ministry of Petroleum is bound to issue advice to the regulator for an increase in gas tariffs. However, political considerations forced the prime minister to postpone the price rise until April.

Published in The Express Tribune, April 7^th,  2015.

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