Gas price increase updated

Islamabad:

Pakistan’s gas and electricity regulators on Wednesday hiked the prices of the two major necessities, making life even more difficult for the country’s inflation-hit population.

The Oil and Gas Regulatory Authority (Ogra) has announced a significant hike in natural gas prices from November 1 this year, “in line with the federal government’s policy guidelines” — yet another condition set by the International Monetary Fund (IMF ) to release the second tranche of $710 million.

While the tariff for protected consumers, who make up 57% of residential users, remains unchanged, there has been a significant adjustment in the fixed monthly charges for this category — from the existing Rs10 to Rs400 per month. This will increase the annual bill of this class by up to 150%.

For unprotected consumers, the charges have been divided into two slabs. The first category, which uses up to 1.5 cubic centimeter (hm3), has been increased from Rs 460 to Rs 1,000. For the second category, using more than 1.5 hm3, the rate has been increased from Rs 460 to Rs 2,000.

For residential consumers who are not protected, a significant increase in natural gas prices has been announced. Prices will increase by 50% to Rs 300 per million metric British thermal units (mmbtu) for consumption up to 0.25 hm3, double to Rs 600 per mmbtu for up to 0.6 hm3 and increase by 150% to Rs 1,000 for up to 1 hm3.

Reading Rising gas prices to feed inflation

A significant increase of 173% was seen in the slab of those using up to 3 hm3, where prices will soar to Rs 3,000 per mmbtu from the current Rs1,100.

The tariff for bulk consumption has been increased by a quarter from Rs 1,600 per mmbtu to Rs 2,000.

However, the special commercial category (tandoors) will remain unchanged at Rs 697 per mmbtu.

For commercial consumers, a significant tariff hike of over 136% was notified, raising the rate to Rs 3,900 per mmbtu.

Cement plants and CNG stations have increased by more than 193% and 144%, respectively, taking the tariff to Rs 4,400.

The tariff for exporting industries has been increased by 86% to Rs 2,050 per mmbtu. For non-export industries, the duty has been increased by 117% to Rs 2,600.

The caretaker federal government, in accordance with section 7(1) 8(3) and 21(2)(h) of the Ogra Ordinance, 2002, has notified the revised category-wise selling prices of natural gas to the authority to notify them.

The statement said the federal government had the exclusive jurisdiction to fix prices for different categories of gas consumers taking into account the socio-economic agenda and sectoral policies, while making adjustments to cross-subsidies as well as growth surcharge.

On 23 October, the interim cabinet approved a significant increase of up to 194% in natural gas prices, which took effect on 1 November.

Ogra in its statement said that the country’s natural gas reserves are depleting at a very fast rate, which was 5% to 7% per year.

Every year, the natural gas basket is dominated by expensive imported fuels.

The sharp depreciation of the rupee against the dollar has increased the cost of natural gas.

General inflation has driven up the cost of natural gas exploration, production, distribution and transportation.

The statement said previous governments had retained control over the pricing of a scarce resource instead of strengthening the regulator and creating strong internal checks on the system for transparency and efficiency.

He added that inadequate gas pricing under previous governments and lack of funding to divert imported gas over the years had hit the national exchequer and created a revolving debt stockpile of Rs 2.1 trillion – which was interest-free.

Ogra also said that in the name of affordability, some of the country’s most profitable businesses use natural gas at the cheapest prices.

This has unduly enriched certain industries while depriving the lower income class, including poor farmers and small-scale industries, of affordable natural gas, he continued.

According to the statement, the pricing decision was very difficult for the caretaker government.

The affordability goal had a significant conflict with the supply chain sustainability argument.

“It is known that we are under the IMF program, which has abolished all kinds of subsidies,” he wrote.

read more After much fuss, the increase in natural gas prices was approved

Ogra pointed out that the increased prices in January 2023 were the first increase in 2.5 years. This lack of action led to an increase of Rs 461 billion in FY 22-23 alone.

“In case the caretaker government does not proceed with price hike as advised by Ogra and does not fund RLNG [regassified liquefied natural gas] diversion to [the] domestic department in [the] in the absence of subsidies, there will be a further addition to the circular debt of about Rs 400 billion,” the statement added.

Similarly, the National Electricity Regulatory Authority (Nepra) has notified an increase of Rs 0.40 per unit in electricity rates due to fuel cost adjustment (FCA) for the month of September 2023.

According to a statement issued by Nepra, the tariff hike is only for one month and electricity consumers will have to make the additional payments in their November bills.

He added that the increase in electricity tariff will be applicable to all categories of consumers except Lifeline users and K-Electric users.