More than 300% increase in proposed gas tariffs

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More than 300% increase in proposed gas tariffs

The government is likely to increase the gas prices for household consumers to more than 30% in order to satisfy the requirements for revenue of the gas utilities in the current financial year 2022-23, sources reported on Wednesday.

Prior to that in the year, previously, Oil and Gas Regulatory Authority (Ogra) had approved a an increase of 45% in gas prices for customers of two gas utilities namely the Sui Northern Gas Pipeline Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL).

The regulator had referred it’s decision onto the government, which was to notify the updated rates. Premier Shahbaz Sharif is expected to make the final decision on price hikes for gas for consumers.

Sources said that the government had recently held a discussions to decide on the best way to transfer the increase in price of gas to consumers. They also said that no hike was suggested for consumers in the domestic market falling within the slab 1 of Rs173 for millimetres of fuel.

However, there’s an option to increase the rate by 43 percent, from Rs121 to Rs173 per million BTU, for those who reside in slab 2 and a similar rate of Rs300 per mmbtu , for those who reside in slab 3.

In slab 4 could be facing an increase of 26%, between Rs553 and Rs696 per mmbtu. This is a 15% increase , from Rs 738 to 1856 per mmbtu in slab 5 and a staggering leap of 353% from Rs1,102 to Rs3,712 mmbtu , for those living in slab 6.

Additionally commercial tandoors for roti may also be affected by an increase in the gas tariff between Rs697 and the current rate of Rs928 per millimetric btu. According to sources, should the price increase be made public, the cost of roti could also go up.

According to the sources, the proposed prices were lower than the price of LPG, which is liquefied petroleum gas (LPG). The LPG was regarded as fuel for the less fortunate and were charged twice the amount of money paid by people who used piped gas.

The Pakistan LNG Limited (PLL) had not been able to ensure liquefied natural gas (LNG) cargoes in order to fulfill the needs of the country in anticipation of the coming winter. It is Pakistan State Oil (PSO) is an importer of LNG predominantly from Qatar.

In the last winter season in the last winter, the government diverted costly LNG to consumers in the country. Gas utilities could not pay for the price of costly LNG due to the lack of any legal framework. This led to the accumulation in gas bill.

In the past, the power sector was a major defaulter on gas bills. However, the SNGPL was now an important defaulter for the PSO and owes the PSO Rs311 billion due to LNG supply.

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The prior Pakistan Tehreek-e-Insaf (PTI) government had approved the weighted average price of the gas bill in parliament to recover the total price of LNG from the consumers in the country. This bill has been challenged by the Sindh High Court (SHC).

The provinces that produce gas have opposed the implementation of the weighted average cost of gas prices. Punjab is the largest user of LNG. Three provinces stated that they were unable to subsidize the users in Punjab.

In the past, prices for gas are cheaper in Pakistan. The government has given the gas subsidy to captive power and fertiliser factories in the textile sector as well as other sectors that are export-oriented. The cross-subsidy model is currently in use for other industries.

In the meantime, Ogra okayed the 45 percent increase in gas prices in opposition to the utility’s demand for a 198% hike. This will help the SNGPL achieve their Rs260.9 billion revenue goal and the SSGC will collect Rs285 billion from gas users through revised prices for gas.

Ogra stated in its decision that the financial consequences of the shortfall in revenue of Rs264.8 billion that was accounted to Rs720.20 per mmbtu had not been sent by the Federal government for a suitable policy decision. Thus, it was not been considered as part of the final decision.

The regulator also granted the SSGC to increase the price of gas by 44% to help to cover its revenue gap for 2022-23. The gas company had asked for an increment of 45 percent. In this way, Ogra requested the federal government to provide advice on the category-wise price of sales.

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