IMF stresses end to gas subsidy for domestic consumers

February 23,2019

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ISLAMABAD: International Monitory Fund (IMF) is exerting pressure on PTI government to end the subsidy to all gas consumers’ categories and charge from them the full cost of the gas that currently stands at average price of Rs629 per MMBTU as per the determination of Ogra in last year.

The government is currently extending Rs25 billion to zero-rated (textile, carpet, surgical, sports and leather) industry till June 2019 and Rs28 billion for some domestic consumers. The tandoors are also being given subsidy to contain Rooti (bread) price.

The government has kept the gas price for export industry at $6.5 per MMBTU just to encourage exports of the country. The government has taken IMF into confidence on this initiative, but the Fund wants the government to increase the gas tariff by ending the subsidy to domestic sector, a senior official at Petroleum Division told The News.

The official said that the government first wants Ogra to come up with estimated gas tariff for 2019-20 and then it will decide the sale price. The government, he said, aspires that the regulator comes up with new prescribed gas price for 2019-20 by May next, then it will notify the new gas tariff to be effective from July 1, 2019.

However, gas utilities have submitted in their new petitions seeking the average full gas cost at Rs727 per MMBTU for ongoing financial year (2018-19) and if IMF continues to insist for full gas cost from every consumers and asks for erasing the subsidy, then gas prices are feared to more soar by up to Rs215 per MMBTU.

The Fund wants the government to erase the subsidy in gas tariff being given to some consumers as the current average gas tariff stands at Rs512.17 per unit against the full average gas cost of Rs629 per MMBTU for consumers of Sui Northern. And if compared with new full gas cost at Rs727 per MMBTU as pleaded by gas companies, then the gas tariff may go up to Rs215 per MMBTU. However Ogra is still working as to whether the demand of gas companies is justified or not.

This means that the government is extending the subsidy to 6.7 million of consumers of Sui Northern the Rs116.83 against every MMBTU, a senior official of Petroleum Division told while confirming the fact that IMF wants government to end the subsidy at least from the next financial year.

However, the official said that the full gas price for consumers of Sui Southern stands Rs 595 per MMBTU and the government is giving them the subsidy of Rs82.83 per MMBTU.

The total gas consumers of Sui Southern are 3.2 million. The PTI government has earlier increased the gas prices by 10-143 percent to recover Rs97 billion but still there is a shortfall of Rs 50 billion for which the Sui Northern have submitted the new petition with OGRA asking for the prescribed gas price at Rs727 per MMBTU and Sui Southern has demanded for prescribed gas price at Rs671 per MMBTU and the gas regulator is set to announce new gas tariff.

Both the gas utilities have also required to increase the tariff for more revenue requirement as Pak Rupee has lost its value by over 30 percent and the companies have to pay the cost to the gas exploration companies more as the well head prices stand in dollar terms. “And this has an impact of about Rs91 billion loss which Sui Northern has included in its petition to cover this loss too,” the official said.


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