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Friday April 12, 2024

Gas tariff to be increased for fertilisers from this month

Sources say increase will come into effect before IMF's first review

By Ashraf Malkham
October 06, 2023
A farmer sprinkles fertiliser in a field. —APP/File
A farmer sprinkles fertiliser in a field. —APP/File

ISLAMABAD: The government is likely to hike the gas tariff for fertiliser producers from this month to fulfil a key demand of the International Monetary Fund (IMF) of controlling circular debt, Geo News reported citing sources.

Officials told Geo News, on the condition of anonymity, that three ministries — finance, petroleum, and industries — have started working on a plan to increase the gas prices for fertiliser manufacturers.

As per the decision, the factories will be supplied gas at the rate of Rs580 per MMBtu compared to the Rs302 per MMBtu they are getting right now.

Furthermore, fertiliser manufacturers for feedstock will get gas at Rs1,580 per MMBtu as the price of the commodity has been increased by Rs556 per MMBtu for them.

The sources shared that the increase will come into effect before the first review of the IMF under the $3 billion Stand-by Arrangement (SBA) loan which would start at the end of the current month — October.

Gas tariff increase plan in works under IMF deal

The Petroleum Division is in the process of giving the final touches to a summary to increase the gas tariff, which will be tabled in the Economic Coordination Committee (ECC) meeting for approval, The News reported earlier this week.

After ratification by the federal cabinet, the government will notify the new gas prices not from July 1, 2023 but from the date the cabinet approves the new tariff, top officials at the energy ministry told The News.

"The top functionaries of the Petroleum Division have so far planned not to spare even the protected residential consumers just to ensure a zero increase in monthly flow to the circular debt in the gas sector. The protected consumers falling in the first four slabs, utilising gas up to 0.25 HM3, 0.5 HM3, 0.6HM3 and 0.9hm3 may face an increase from Rs300 to less than Rs500 per MMBtu."

They told The News that the government has also planned to end the differential treatment of the fertiliser sector and may also increase the gas tariff for the sector up to Rs1,500 per MMBtu for feedstock purposes. The said increase will be applicable to all fertiliser industry players.

The fertiliser sector is currently getting subsidised gas rate of Rs510 per MMBtu for feedstock and Rs1,500 per MMBtu as fuel for electricity generation, steam and use of housing colonies.

The official said that Fauji Fertiliser among its competitors was getting a much lower gas price from the Marri Gas Company. Fauji Fertiliser was getting gas for feedstock at the rate of just Rs302 per MMBtu, which is why Marri Gas Company braved the loss of Rs4 billion last year. Now it is not simply possible to feed the fertiliser sector with cheaper gas as the gas sector has virtually become unsustainable. The circular debt of the sector has risen to Rs2,900 billion.