No budgeted subsidy for gas consumers in next financial year, IMF tells govt

The government will end this subsidy to domestic consumers for the next financial year 2024-25 under the head of RLNG use

By Khalid Mustafa
April 01, 2024
This file photo taken on January 26, 2022, shows the seal of the International Monetary Fund (IMF) in Washington, DC. — AFP

ISLAMABAD: In a new development, the International Monetary Fund (IMF) has asked the authorities in the Petroleum Division not to end cross subsidy in one go but go for it in a phased manner till the protected gas consumers are safeguarded under the BISP (Benazir Income Scheme Programme) mechanism.


However, the IMF has asked the government to end the budgeted subsidy to gas consumers from July 1, 2024, because of RLNG [Re-Liquefied National Gas] diversion to domestic consumers. The government extended last fiscal year 2022-23 an amount of Rs40 billion as subsidy to domestic consumers against the RLNG diversion and in the ongoing financial year 2023-24, the subsidy of Rs29 billion on account of RLNG diversion.

The caretaker government increased the gas tariff for protected domestic consumers by 40 to 65.29 per cent from February 1, 2024, to reduce the cross-subsidy, which stands at Rs100 billion. For the protected consumers using gas up to 0.25 hm3 per month, the tariff has been increased by Rs90/MMBtu (or 65.29pc), taking its price from the existing Rs121/MMBtu to just Rs200/MMBtu.

For the protected consumers using 0.5 hm3 gas, an increase of Rs100/MMBtu (or 67pc) has been allowed, taking the rate from existing Rs150/MMBtu to Rs250/MMBtu. For the protected consumers using up to 0.6 hm3 gas, an increase of Rs100/ MMBtu or 50pc has been allowed, which has jacked up the prices from Rs200/MMBtu to Rs300/MMBtu, while for the consumers using up to 0.9 hm3 gas, the price has been increased by 40pc or Rs100/MMBtu from Rs250/MMBtu to Rs350/MMBtu. There is still space to increase their tariffs, ensuring their affordability.

However, the IMF wants the vulnerable class should be protected with affordable tariffs unless an alternative mechanism is adopted through the BISP programme. “We have to give IMF the plan under which protected consumers would be given subsidy for their gas tariffs through BISP or another mechanism to charge them full gas cost to end the cross-subsidy.”

The government will end this subsidy to domestic consumers for the next financial year 2024-25 under the head of RLNG use, as the RLNG diversion cost would be recovered from domestic consumers through WACOG (weighted average cost of gas) mode, which had now become part of the estimated revenue requirement of the gas companies.