Summary seeking up to 50pc raise in gas sale prices re-submitted

ISLAMABAD: Petroleum Division has re-submitted a summary for upto 50 percent raise in gas sale prices to the interim cabinet in-line with the demand of the International Monetary Fund (IMF), an official of Petroleum Division told Business Recorder on condition of anonymity.

“It is most likely that the interim cabinet will approve the sale price of gas for 12 categories of protected and non-protected consumers in the current month (September),” he maintained.

After the approval from cabinet, Petroleum Division would notify the category-wise consumer sale price with effect from July 1, 2023, he added.

Govt says gas prices to be revised upward

Oil and Gas Regulatory Authority (OGRA) had recommended to raise gas prices for consumers of the Sui Northern Gas Pipeline Limited (SNGPL) by 50 percent and for the Sui Southern Gas Company (SSGC) by 45 percent increase on June 3, 2023.

Pakistan Democratic Movement (PDM) government however did not increase the price of gas and was in violation of the law as under the OGRA Ordinance 2022, the federal government is bound to advise the regulatory authority on minimum charges and sale price for each category of retail consumers for notification in the official gazette within 40 days.

In a press conference on Friday, the Interim Minister for Energy, Muhammad Ali had said the increase in gas rates ahead of winter was inevitable to contain the gas-sector circular debt that was growing at the rate of Rs350 billion per year. The gas sector has already piled up a debt, including interest, of Rs2.7 trillion.

Last revision in gas tariff was held on February 13, 2023 when PDM government had approved an increase up to 113 percent in the natural gas prices to recover Rs340 billion from consumers with effect from January 1, 2023.

Sources said the IMF also called for the implementation of the weighted average cost of gas (WACOG) to fully recover RLNG prices from domestic consumers. This would involve calculating the gas price by considering both imported LNG and local gas prices, determining an average price, and setting consumer-specific prices accordingly.

The SNGPL has to recover Rs245 billion of RLNG diversion to domestic sector during the period July 2018 till Apr-2023.

The oil and gas regulator has allowed both gas companies a collection of an estimated revenue requirement (ERR) of Rs697.4 billion from gas consumers in 2023-24. The SNGPL will bear the burden of collecting Rs358.4 billion and SSGC will collect Rs339 billion.

According to OGRA’s determination, SNGPL’s average prescribed price will rise by 50 percent or Rs415.11, while SSGC’s average prescribed price will witness a 45 percent increase or Rs417.23. This surge primarily accounts for the cost of gas, which makes up over 85 percent of the determined price.

Copyright Business Recorder, 2023