More tough days ahead: Four gas tariff hike scenarios worked out for IMF to decide

By Khalid Mustafa
March 23, 2019

ISLAMABAD: More tough days for gas consumers are ahead as the government has prepared four gas tariff hike scenarios and will decide one scenario about the raise in tariff after talks with IMF.

Advertisement

The PTI government is desperate for $12 billion loan from IMF to get out of economic morass. The spike in gas tariff can be 18 percent, 35 percent, 42 percent and even 94 percent, a senior official told The News.

“The top mandarins of the Petroleum Division have worked out under first scenario the 18 percent increase to meet the loss of Rs70 billion only in the ongoing financial year 2018-19 both the gas companies —Sui Northern and Sui Southern are facing.”

If the revenue requirement, the official said, for next financial year 2019-20 that the Ogra is going to work out sometime in month of April, is kept in view at estimated Rs156 billion, the tariff increase would stand at about 42 percent.

If the losses of the gas companies of worth Rs143 billion in preceding years are considered in the tariff, the gas rate would go up to 35 percent and more importantly in the fourth scenario, if all the losses of the gas companies that stand at Rs368 billion are added, the tariff would go up to 94 percent.

However, spokesman for Petroleum Division said that government is inclined to increase gas tariff by 15-20 percent to cope with the loss of the gas companies in the current financial year.

However, he showed his inability when asked for gas tariff raise if losses of preceding years are included. However, he said that Ogra will determine the revenue requirement for 2019-20 which will be taken care of when new gas tariff is to be effective from July 1, 2019. However, the official said that now it depends where the forthcoming talks with IMF end with regard to size of gas tariff hike to be effective from July 1, 2018.

The PTI government headed by Imran Khan has already faced the backlash from masses after increasing the gas tariff by 10-143 percent. Now prime minister is very sensitive to further raise in gas tariff. No doubt, the government will have to go for more increase in tariff once it enters IMF programme. “The PTI government will try from pillar to post to limit the increase in the gas tariff by up to 18-30 percent and will not go beyond it but IMF will ask to the government to increase the tariff at the maximum to substantially reduce the losses of the gas companies.”

However, the official said, in the earlier interactions of the government’s economic managers with Fund officials, IMF is exerting pressure to do away with the subsidy to gas consumers and charge the full cost of gas from every consumers that stands at Rs631.86 per MMBTU for consumers of Sui Northern and Rs623.62 per MMBTU for consumers in Sui Southern.

“The gas companies are currently charging average Rs512 per MMBTU from the consumers which is still less by Rs120 per MMBTU from the full gas cost of Rs631.86 per MMBTU for Sui Northern gas consumers. The official said that the government may revise the slabs in the gas pricing formula as the existing 7 slab formula has proved very detrimental to the consumers.”

In the recently held cabinet meeting, the gas tariff increase issue is discussed and exchange of harsh words are reported to have been exchanged between Finance and petroleum Ministers in the meeting.

The finance minister advocated the raise in tariff by 42 percent whereas petroleum minister asked for 20 percent. But the insistence of IMF that is likely to give $12 billion to the cash-starved PTI government in the forthcoming talks will decide the size of the increase in gas tariff as beggars are not the choosers,” the official argued.

Advertisement