Tuesday April 23, 2024

Another hike in gas tariff approved on IMF diktat

Tariff was hiked to meet deadline of (IMF) for hiking the gas prices under structural benchmark criteria till February 15, 2024

By Khalid Mustafa & Mehtab Haider
February 15, 2024
This photo shows the flames of a lit burner of a gas stove. — AFP/File
This photo shows the flames of a lit burner of a gas stove. — AFP/File

ISLAMABAD: The protected domestic gas consumers have been hit as the caretaker government has placed a slight cut in the increase of their gas tariff against the proposed hike by 40 to 66.67 percent. Only the interim finance minister and energy minister know the exact hike in gas tariff of the protected consumers.

The protected consumers fall in the first four slabs and utilise gas up to 0.25 HM3, 0.5 HM3, 0.6HM3 and 0.9hm3.

The Economic Coordination Committee (ECC) of the Cabinet that met here on Wednesday did not allow the increase in protected gas consumers’ tariff by 40-66.67 percent. However, it allowed slight increase in their tariff. The final decision will be taken by the federal cabinet, a senior official who was part of the meeting told The News.

“The impact of reduction in proposed tariff of protected consumers has been passed on to fertilizer sector.” However, the said changes will be pitched to the federal cabinet which may meet today (Thursday) for approval.

The tariff was hiked to meet the deadline of the International Monetary Fund (IMF) for hiking the gas prices under structural benchmark criteria till February 15, 2024.

However, as per the summary of Petroleum Division, for roti tandoor, commercial, power sector and cement sector there would be no hike in the gas tariff.

The ECC approved the increase in gas tariff of CNG to Rs3,750 per MMBTU from Rs3,600 per MMBTU. For the fertilizer sector, the gas price of Engro and Fauji fertilizers for feed purposes has been suggested in the summary at Rs750 per MMBTU. However, the impact of reduction in the proposed increase in protected domestic consumers would also be passed on to these fertilizer plants. The federal cabinet would decide to this effect.

For Agritech and Fatima fertilizer, the gas price has increased to Rs1,597 from Rs1,239 per MMBTU and for fuel purposes, their tariff has been increased to Rs1,750 from Rs1,580 per MMBTU.

However, for non-protected domestic consumers, the ECC has approved the increase in gas prices by five to 66.67 percent. Those non-protected consumers who use gas up to 0.25hm3 will now pay an increase in gas tariff by 66.67 percent to Rs500 per MMBTU instead of the existing Rs300 per MMBTU.

The consumer who uses 0.6hm3 will face an increase of 41.7 percent in tariff to Rs850 per MMBTU from Rs600 per MMBTU. Those who use 1hm3 in a month will now pay Rs1,250 per unit from the existing Rs1,000 per MMBTU with an increase of 25 percent. The domestic consumer who utilises 1.5 hm3 a month would face an increase of 29.17 percent as their tariff has been increased to Rs1,550 per MMBTU from the existing Rs1,200.

Those consumers who consume gas up to 2hm3 will experience an increase in gas price of 21.87 percent as their tariff has been increased to Rs1,950 from Rs1,600 per unit. The ECC increased the gas price of those who use gas up to 3hm3 by 10 percent to Rs3,300 from Rs3,000 per MMBTU and those who use gas a month 4 hm3 will face an increase of 8.57 percent to Rs3,800 from Rs3,500 per MMBTU and those who utilise gas of over 4hm3 will face increase of 5 percent to Rs4,200 from Rs4,000 per MMBTU.

However, the press release issued by the Finance Ministry said that Caretaker Minister for Finance, Revenue, and Economic Affairs Dr Shamshad Akhtar presided over the ECC meeting.

The ECC considered the proposal of Federal Board of Revenue (FBR) regarding “Rationalisation of Criterion of Enhanced Rate of 25% Sales Tax on Locally Manufactured/ Assembled Vehicles (PCT87.03)”. The proposal was approved after a detailed discussion.

Finance Division sought “Approval of Share Subscription Agreement (SSA) of National Credit Guarantee Company Limited (NCGCL)” from the forum. The ECC approved the proposal of signing of SSA between NCGCL, Karandaz and the Government of Pakistan through Ministry of Finance.

The Ministry of Commerce presented a summary regarding amendments in “SRO 760(I)/2013-Import and Export of Precious Metal Jewellery and Gemstones Order, 2013” and “Import Policy Order 2022- Serial No. 16 of Part II, Appendix-B”. The forum agreed to the proposals in principle and directed that a committee comprising of representatives of the Ministry of Commerce, Ministry of Law, FBR, and SECP may formulate detailed proposals for this export-oriented policy reform targeting opening up of the service sector.

The summary of the Petroleum Division regarding “Natural Gas Sale Pricing FY 2023-24 (Effective 1st February, 2024)” was deliberated upon at length. After discussion, ECC decided that revision of sale price/ tariff should be consistent with revenue requirements of the Sui companies. The committee recommended uniform gas prices for fertilizer plants. ECC directed the Competition Commission of Pakistan to investigate the undue increase in urea price during the recent past and fix the responsibility. The ECC also directed the Ministry of Industries to ensure the stability of Urea prices in the market.

The ECC also approved the summary of the Intelligence Bureau for “Provision of Additional Funds of Rs125 million during the Current Financial Year” to meet the increasing requirements of the Bureau vis-a-vis operations against terrorists and anti-state elements.

The summary of the Finance Division regarding “Approval of Technical Supplementary Grant for Provision of Rupee Cover for Remaining Funds amounting to Rs7,621,756,096 of 1st Tranche of Credit Lines of US$85 million obtained from the World Bank” was approved by ECC. The CPI and SPI-based inflation would witness another fresh wave when the new government is going to assume power.

This scribe contacted the IMF’s Resident Chief Ester Perez Ruiz and inquired about the possibility of holding the last review meeting under the existing Standby Arrangement (SBA) programme, she replied that the IMF was currently focused on the completion of the ongoing programme. “We are currently focused on the completion of the current programme which ends in April 2024 and the task of stabilising the economy via the implementation of sustainable policies under the SBA programme,” she added.

The Oil and Gas Regulatory Authority (Ogra) had notified adjusted end-user gas prices of on average 75 percent on February 17, 2023, to generate an estimated revenue of Rs310 billion from consumers in second half of FY23. The end-user gas prices were again adjusted in November 2023 (following Ogra’s June 2023 determination) by, on average, 65 percent to generate an estimated additional natural gas-related revenue of Rs470 billion, to meet estimated revenue requirements for the fiscal year, including RLNG diversion to households.

The increase was along the same tariff slab system adopted by the cabinet in February 2023. As in the power sector, the slab system ensures full cost-recovery, affordability, and efficiency (through, among other ways, the establishment of cross-subsidised lifetime tariffs and other protected tariffs for smaller residential consumers. Now again an average 67 percent hike was made in order to recover the losses of gas sector.