Gas tariff hike to address Pakistan’s economic woes: energy minister

The government’s decision to raise gas tariffs will help address the economic ills of the country, said Caretaker Minister for Energy and Petroleum Muhammad Ali on Tuesday.

Addressing a press conference, while sitting alongside Caretaker Minister for Information Murtaza Solangi, Ali said the decision to increase gas tariffs was a difficult one, but much-needed for the stake of the country.

“In the past, governments have shied away from increasing gas prices,” he said.

The minister shared the Oil and Gas Regulatory Authority’s (OGRA) revenue requirement for this year stands at Rs697 billion, whereas Re-gasified Liquid Natural Gas (RLNG) diversion to the domestic segment stands at Rs210 billion.

“For the past 10 years, the indigenous gas reserves are on a downward trend, due to which we are compelled to purchase costly RLNG to meet our energy needs,” said the minister.

Ali said that Sui companies would have sustained losses of more than Rs400 billion if gas prices were not raised. “In 2013-14 losses suffered by gas companies stood at Rs18 billion, which rose to Rs889 billion in 2022-23,” he shared.

“After the latest gas price increase, the circular debt in the petroleum sector would not grow,” he added.

The interim minister said that due to mounting losses, the government was not in a position to invest in the exploration of new reserves, thus the country became more dependent on imported fuels, which ballooned our import bill.

“Moreover, the rising fiscal deficit on account of import payments drove interest rate and inflation in Pakistan. Therefore, these steps will mitigate inflation and lower interest rates,” said Ali.

The interim minister reiterated that the overall circular debt of the energy sector rose to Rs2,100 billion. “If the gas prices were not increased, the circular debt would have increased to Rs2,480 billion by June 2024,” said the minister.

He said that the gas tariff of nearly 57% of household connections has not increased. “Their fixed charge has been raised from Rs10 to Rs400,” he said. Despite the increase, the protected segment would avail gas at a subsidised rate.

“We have supported the protected and middle-class segment, which makes up 93% of the consumers,” he said.

For unprotected categories, the tariff is increased on a progressive basis with higher income households paying higher tariff.

“Gas price consumed by Tandoors remains unchanged,” he added.

The industry tariffs are set so as to rationalize the gas prices in North and South regions and create a level playing field for everyone, he said.

“All industries in the South will get gas at the same rates, whether the industry is old or new. The same goes for industries in the North. This measure will help create more employment opportunities in the country,” said Ali.

Gas prices hiked on Monday

The federal government on Monday approved an increase in the price of natural gas for different categories of consumers as advised by the OGRA with effect from November 1, 2023.

The drastic devaluation of rupee against dollar coupled with general inflation, which has increased cost of gas exploration, production, distribution and transmission has resulted in the increasing cost of gas.