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Wednesday June 12, 2024

Up to 50pc gas tariff hike looms from next month

Starting from July 2023, consumers can expect a potential 50 per cent increase in natural gas prices in Pakistan

By Israr Khan
June 03, 2023
Up to 50pc gas tariff hike looms from next month. The News/File
Up to 50pc gas tariff hike looms from next month. The News/File

ISLAMABAD: Starting from July 2023, consumers can expect a potential 50 per cent increase in natural gas prices in Pakistan. 

On Friday, the Oil and Gas Regulatory Authority (Ogra) concluded its determinations for two struggling state-run gas utilities and submitted them to the government for issuance of a notification. For the upcoming fiscal year 2023-24, Ogra has calculated an estimated revenue requirement (ERR) of Rs697.4 billion to be collected from gas consumers. The Sui Northern Gas Pipeline Limited (SNGPL), responsible for gas supply to consumers in Punjab and Khyber-Pakhtunkhwa (KP), will collect Rs358.4 billion.

ss Meanwhile, the Sui Southern Gas Company (SSGC), which supplies gas to consumers in Sindh and Balochistan, will collect Rs339 billion. The average prescribed price determined by Ogra for SNGPL stands at Rs1238.68/MMBTU, reflecting a 50 per cent increase or Rs415.11 compared to the existing price. Similarly, the average prescribed price for SSGC is set at Rs1350.68/MMBTU, representing a Rs417.23 increase or 45 per cent. Ogra clarified that the average prescribed price mainly consists of the cost of gas, which accounts for over 85 per cent of the determined price. This cost is a pass-through item and is calculated based on the agreement between the Government of Pakistan and gas producer companies. The decision made by Ogra has been forwarded to the government for notification, which is expected to occur within 40 days. Once implemented, the SNGPL and the SSGC will be authorised to collect hundreds of billions of rupees from consumers.

The SNGP initially requested revenue requirements of Rs1044.12 billion, including a revenue shortfall from the previous year amounting to Rs560.38 billion. Based on this, the SNGPL sought a 286 per cent increase of Rs2,206.19/MMBTU, which was aimed to set prescribed prices at Rs2,977.5/MMBTU. Similarly, the SSGC requested an increase of 42 per cent, seeking Rs388.01/MMBTU to recover Rs331.68 billion, resulting in a proposed prescribed price of Rs1321.47/MMBTU. The regulator has proposed eliminating the distinction between protected and unprotected slabs for gas consumers and setting the price at 1238.68/MMBtu.

This change will result in a significant increase in gas prices, up to 923 per cent, for protected low-slab consumers. However, two high gas-consuming slabs will benefit from the new pricing as they were previously paying up to Rs3100/MMBtu. The regulator has also recommended a substantial increase in gas prices for roti tandoors. Interestingly, while gas will become more expensive for zero-rated consumers, CNG stations, cement, fertilizer, power stations, and independent power producers (IPPs) will experience a reduction in gas prices. However, the feedstock gas prices for the fertilizer sector will more than double.

The existing prescribed gas prices for cement, CNG, ice factories, commercial consumers, fertiliser feedstock gas, power stations, captive power, and IPPs are Rs1500/MMBtu, Rs1805/MMBtu, Rs1650/MMBtu, Rs1650/MMBtu, Rs510/MMBtu, Rs1050/MMBtu, Rs1200/MMBtu, and Rs1050/MMBtu, respectively. The regulator now suggests a uniform prescribed price of Rs1238.68/MMBtu for all these categories.

SSGCL

For the SSGC clients, the regulator has proposed eliminating the distinction between protected and non-protected slabs and setting the prescribed prices at Rs1350.68/ MMBtu. The tariff for the first slab of domestic consumers on the SSGC system has been increased to Rs1350.68/MMBtu from the earlier prices of Rs200/MMBtu. The existing price of Rs300 for the second slab, Rs400 for the third slab, Rs600 for the fourth slab, Rs800 for the fifth slab, Rs1100 for the sixth slab, Rs2000 for the seventh slab, and Re3100 for the eighth slab have been determined at Rs1350.68/MMBtu.

This indicates a significant increase in gas tariff for lower slabs, while higher slabs will experience a substantial reduction. It should be noted that over 80 per cent of gas consumers fall within the lowest three to four slabs. The tariff for the roti tandoor category of gas consumers has been proposed at Rs1350.68/MMBtu for all five slabs whose existing tariffs range from Rs110 to Rs700/MMBtu. The gas tariff for commercial gas consumers, including ice factories, has been reduced from Rs1650/MMBtu to Rs1350.68/MMBtu. The tariff for the general industry has been increased from the current Rs1200 to Rs1350.68/MMBtu. For export-oriented general industry, the tariff has been increased from the existing Rs1100 to Rs1350.68/MMBtu. The captive power generation tariff has been raised from Rs1200 to Rs1350.68.

The prescribed price of Rs1350.68/MMBtu has been determined for all these categories, including cement (previously priced at Rs1500/MMBtu), CNG (previously priced at Rs1805/MMBtu), Fuji Fertiliser Bin Qasim feedstock for fertilizer (previously priced at Rs510/MMBtu), power generation (previously priced at Rs1050/MMBtu), Pakistan Steel (previously priced at Rs1200/MMBtu), and IPPs (previously priced at Rs1050/MMBtu).