Gas tariff hike will not dent export competitiveness, says minister

KARACHI: The caretaker Energy Minister Muhammad Ali said the planned increase of gas tariffs to around $8 per million British thermal units (mmBtu) for industries and exporters would not affect their competitiveness with regional rivals

"As far as industries are concerned, the government has ensured to keep the industries, exporters competitive by raising gas tariffs to around $8 which was close to competing countries as in India, gas tariff stood at $9 while in Bangladesh, it was $8.25," Ali said at a meeting with the Karachi Chamber of Commerce & Industry (KCCI) late on Friday.

“The measure has also been taken to reduce the gas tariff difference between the north and south.”

The minister said the gas supply situation this year will more or less be the same as it was last year but Sui Southern Gas Company (SSGC), which supplies gas to the south, has been advised to come up with a mechanism that ensures smooth supply of gas to all types of industries for five days a week throughout the year.

"Last year, the general industries remained closed for four months and supply to export-oriented industries was curtailed by 50 percent. We are trying to make sure it does not happen again this year, and all types industries remain operational for five days a week during winter," he added.

Ali said no government willingly raises prices of any product "but we all have to understand the reality and decide accordingly".

The Oil and Gas Regulatory Authority's (OGRA) determination of Rs1,350 per mmBtu was based on average pricing for the whole year which covers losses of natural gas only and it does not include cost of liquefied natural gas (LNG) which is more expensive, the minister said.

He said that with the Economic Coordination Committee's (ECC) decision to increase gas tariffs, 60 percent of domestic consumers will bear the burden of Rs400 per month whereas gas tariff for richer segment has been brought at par with LNG prices.

"No change in tariffs for Tandoor Operators has been done whereas marginal increase in gas tariffs for commercial users has been recommended as these also include hospitals and educational institutes while a meager increase in fertilizer sector has also been recommended to keep prices of commodities under control."

Ali, after listening to business community's concerns over unbearable hike in gas tariffs, assured that he will try his best in the cabinet's meeting to bring down the gas tariffs which was being raised to stop circular debt from further appreciation.

The minister informed that the entire gas sector has been suffering grave losses of around Rs400 billion annually since many years and last year, these losses reached Rs461 billion, resulting in accumulating the overall losses of the gas sector to a whopping Rs2.1 trillion, hence, raise in gas tariffs has been recommended.

"Work is underway to release the stuck up Rs7 billion payable to industries against previous incremental consumption as committed by Secretary Energy while the Ministry is also working on introducing a winter package for incremental consumption this year."

Speaking on the occasion, Chairman BMG Zubair Motiwala appreciated the decision to raise gas tariff for domestic consumers which would compel domestic consumers to avoid unwanted usage of gas, resulting in availability of more gas to industries for productive usage.