The caretaker government of Pakistan has approved a significant increase in gas prices to recover additional Rs350 billion from consumers in order to save gas companies from bankruptcy. The increase ranges from 137% for commercial consumers to 193% for cement manufacturers. The government has also approved the import of 1 million metric tons of wheat to maintain strategic reserves.
Pakistan's caretaker government has approved a significant increase in gas prices for domestic, commercial, and CNG users, as well as cement manufacturers, in order to save gas companies from bankruptcy. The new prices will take effect on November 1, 2023.
The government has not increased gas prices for domestic consumers of up to 0.9 hm3 consumption, but has increased their fixed monthly bill from Rs10 to Rs400. The fixed monthly charge for consumption up to 1.5 hm3 has been increased from Rs460 to Rs1,000, while for consumption of over 1.5 hm3 it has been increased to Rs2,000 per month.
The tariffs for the highest domestic consumption are aligned with liquefied petroleum gas (LPG) cost, according to the decision. The previous slab benefits are being maintained up to consumption of 4 hm3 but there will not be previous slab benefits in the last slab of non-protected domestic category.
The gas price for up to 0.25 hm3 consumption has been increased by 50% to Rs300 per mmbtu, for 0.6 ohm 3 consumption has been doubled to Rs600 and for 1 hm3 consumption the rate is increased to Rs1,000 per mmbtu – an increase of 150%.
For up to 1.5hm3 consumption, the ECC doubled the rate to Rs1,200 per unit, for up to 2 hm3 consumption it is also doubled Rs1,600 per mmbtu. For up to 3 hm3 consumption the maximum increase of 172% has been approved and the new price at Rs3,000 per mmbtu is set.
The rates for the upper two slabs have been increased even higher than the LGP and the LNG prices. For 4 hm3 consumption, it has been increased to Rs3,500 per mmbtu and for the highest slab it has been jacked up to Rs4,000 –much higher than imported gas price – to pay for subsidies to the richest.
The price revision for all categories of gas consumers is essential to prevent the two gas distribution companies – the Sui Northern Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL) – from bankruptcy.
The gas sector circular debt has already peaked to Rs2.1 trillion and an increase in prices would help companies recover additional Rs395 billion from the consumers. The Oil and Gas Regulatory Authority (Ogra) has determined total revenue requirement of Rs697 billion for SNGPL and SSGCL for this fiscal. The SNGPL’s requirement is estimated at Rs358 billion while SSGCL’s needs are assessed at Rs339 billion.
The ECC approved increasing the prices of gas being consumed by exporters from Rs1,100 to Rs2,050 per mmbtu, an increase of Rs950 or 86%. But the rates are still Rs1,600 per mmbtu lower than the imported gas prices.
Due to shortage of local gas, Pakistan imports expensive LNG and supplies it to the domestic sector in winters and to the industry throughout the year. The current cost of imported LNG was Rs3,650 or $12.5 per mmBtu.
At the current rates, the exporters would get a subsidy of Rs1,600 per mmbtu, which is equal to 44% of the imported gas price. The subsidy will be paid by charging higher gas rates from domestic consumers having higher consumption, CNG consumers, commercial consumers and cement manufacturers.
Similarly, for industrialists who do not export goods but have captive plants, the ECC increased the prices from Rs1,200 to Rs2,600 per mmbtu, an increase of Rs1,400 or 116%. But still these rich industrialists would get a subsidy of Rs1,050 per mmbtu, equal to 29% of the imported gas price.
The finance ministry officials pushed the ECC to consider its decision about provision of subsidised gas to the exporters. The Planning Commission also supported cutting the gas supplies to the export industries and giving it to efficient power plants to achieve lower generation cost. But the ECC did not agree.
