Gas prices: Easy deal

The gas price revision happened without much fanfare. Largely because it offered no spicy headlines like the previous two times. After December 2016, the revision effective from September 2020 is the lowest upward revision in over a decade. The overall weighted average consumer tariff went up by just 3 percent over July 2019, as against Ogra’s revenue determination calling a 10 percent increase.

Recall that earlier in September, the Economic Coordination Committee (ECC) had issued a press release which hinted at the weighted average natural gas tariff to be charged at Rs930/mmbtu till February 2021. Not only was it more than anyone had envisaged, but it was also well over and above what Ogra had determined as revenue requirements. It promised to result in a 26 percent increase in weighted average tariffs, while absolving the domestic consumers. That meant the industries were to face a massive brunt.

That was bordering on absurd and was not likely to happen, unless the tariffs being talked about also included the RLNG, which remains unclear to date. Be that as it may, good sense seems to have prevailed, and the government has managed to sail smooth, without making it a big occasion. The resultant revenue expected to be generated from revised tariffs will be short by only Rs36 billion from the determined revenue requirement.

Not that Rs36 billion is a paltry amount, but in the larger scheme of things, where industries are already facing problems of various kinds, and domestic consumers face higher inflation, it seems a fair price to pay for the good that it can bring.

Also the fact that consumers across categories, have undergone two massive rounds of gas tariff hike since the PTI government took over, mostly on account of prior years’ shortfall, made it a no-brainer for the domestic sector to be absolved of any hike. Also, the quantum of increase was not massive, as prior year shortfalls were largely settled in the last two revisions. There is no clarity as to how this bill will be footed, but hearsay suggests this could be made part of the Covid relief package at some stage.

The gas pricing was relatively easier this time around, but time is nigh, the focus now shifts to the other sides of affairs, that is the LNG. The imported gas has averaged over Rs1000/mmbtu in the last six months, and the volumes are fast catching up with natural gas. It is high time the pricing is rationalized and blended to incentivize use for more efficient resources.