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Sunday December 08, 2024

ECC may increase gas prices today

Official says caretaker setup is bound to implement OGRA’s decision to achieve Rs100bn by Feb 15 under IMF directives

By Khalid Mustafa
February 13, 2024
This image taken on January 10, 2024, shows a low gas flame due to a low gas pressure in a household in Karachi. — Geo.tv/Saad Aalam Angaria
This image taken on January 10, 2024, shows a low gas flame due to a low gas pressure in a household in Karachi. — Geo.tv/Saad Aalam Angaria

ISLAMABAD: In line with the IMF diktat, the caretaker government’s top functionaries are vigorously working to finalise the plan to be submitted to the ECC that meets Tuesday (today) to further increase the gas prices to harness the further target of Rs98-100 billion following the latest decision of the OGRA recommending a hike in gas prices by an average of 23.16 percent from January 1, 2024.

Under the plan that is being finalised by the petroleum division, the CNG price is also proposed to be escalated to Rs3800 per mmBtu from the existing Rs3600 per mmBtu apart from the proposed hikes in gas sale prices for other consumers’ categories.

“We have made various options for an increase in gas prices, and once the other main stakeholders, including the Finance Ministry, agree to one of them, that option will be pitched in today’s ECC meeting,” a senior official told The News.

“The regulator on February 2, 2024, had increased the gas tariff of Sui Northern by 35.13 percent and Sui Southern by 8.57 percent to be effective retrospectively from January 1, 2024, to meet the Rs100 billion shortfall until June 30, 2024. This is the second gas price hike in the current financial year 2023-24.”

The official said that the caretaker setup is bound to implement the OGRA’s decision to achieve Rs100 billion by February 15 under the IMF directives.

Earlier, the authorities had worked out to further increase the fixed charges for all gas categories to attain more revenue of Rs98-100 billion, but this proposal didn’t get endorsements from other stakeholders. OGRA had also opposed the move to increase prices through fixed charges, stressing passing the average increase in gas prices to all gas consumer categories.

In the earlier gas sale price notification effective from November 1, 2023, the government had imposed the per-month fixed charges of Rs400 on protected consumers (those who use gas in the range of 0.25hm3 to 0.9hm3 per month) and Rs1000 on non-protected consumers up to 1.5hm3 and Rs2000 for gas consumers exceeding consumption of 1.5hm3 apart from the increasing the gas prices by up to 193.3 percent.

“With the massive increase in gas price from November 1, 2024, the petroleum division had estimated to collect Rs980 billion in 2023-24, but under the new scenario, this Rs980 billion target could not be achieved because of the low production of gas in the Sui Southern system from 805 mmcfd to 730 mmcfd, which led to low gas sale growth, resulting in limiting the revenue to Rs802 billion against the revenue target of Rs980 showing a shortfall of Rs98 billion. The Rs98 billion deficit in revenue will be met through the average increase of both gas companies by 23.16 percent through the increase in fixed charges.

However, there is a divergence of opinions also cropping up on the scene from other important stakeholders who are opposed to increasing gas prices. However, there are clear dictations from the Fund to enforce the fluctuations in the gas tariff biannually—from July 1 and then from January 1 in any current financial year—as the IMF says this is the only recipe that lies with the government, not only to keep the gas sector from further buildup in the circular debt but also to reduce the stock of the circular debt in phases. “Let’s see what happens in the ECC meeting, but the government has to enforce the further increase determined by Ogra by February 15, 2024.”