Sunday April 21, 2024

In a move set to fuel inflation, govt hikes gas tariffs by up to 67pc

The government increased the system 'local' gas prices with an immediate effect from February 1, 2024

By Khalid Mustafa & Mehtab Haider & Our Correspondent
February 16, 2024
A representational image of a gas stove. — Scientific American
A representational image of a gas stove. — Scientific American

ISLAMABAD: The caretaker government on Thursday, after the federal cabinet’s approval of hike in gas prices, first sent the notification copy to the International Monetary Fund (IMF) in Washington, DC, and then allowed the Oil and Gas Regulatory Authority (Ogra) to upload it on its official website.

The government increased the system (local) gas prices with an immediate effect from February 1, 2024. The hike has been done in all consumer categories, including protected domestic consumers, up to 67 percent except for roti tandoor, commercial, power and cement sectors. The hike in gas tariff will help collect Rs48 billion in five months till June 30, 2024 in the current fiscal. As per IMF directions, the amount would be used to reduce circular debt in the natural gas sector, which stands at Rs1,250 billion. The government has done away with the subsidy in gas tariff to the fertilizer sector. However, next week, the government will also waive the cheaper gas from Mari petroleum gas to three plants of FFC and two plants of Fatima Fertilizers.

In addition, the government has also erased the export sector category and now will treat it equally with the local industry as far as the price of gas is concerned. The government increased the CNG tariff by 4.17 percent 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 and fuel has been notified at Rs1,597 per mmBtu ending subsidy in the tariff.

Similarly, 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 Rs1,597 from Rs1,580 per mmBtu. The government has also equalised the tariff of all export and non-export industries for their captive power plants at Rs2,750, and for process purposes at Rs2,150 per mmBtu. With the increase in the gas prices, the state-owned gas companies -- Sui Northern and Sui Southern – would collect Rs48 billion in revenue in the remaining five months of the ongoing financial year.

This is the second increase in gas prices in a row in FY24. Ogra earlier notified the gas prices with a hike of up to 193.3 percent from November 1, 2023, with a revenue requirement target of Rs902 billion. However, the government was of the view that with the rise in gas prices from November 1, 2023, it would harness the revenue of Rs980 billion, but later on, it was felt that gas sales had tumbled. The deficit in the target had been worked out at Rs98-100 billion, which was a wrong estimate. “We again put our heads together and found out that the deficit in target stands at Rs48 billion that will be achieved in the five months till June 30, 2024 with the rise in gas tariff from February 1, 2024,” said an official.

For the protected domestic consumers, the government has jacked up the gas price by 40 to 65.29 percent. 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. Those protected consumers who use the 0.25 hm3 (hectare meter cubic) gas a month will face an increase in tariff by 65.29 percent to Rs200 per mmBtu from Rs121 per mmBtu. The consumers who use 0.5hm3 will face a hike of 66.67 percent as their new tariff will be of Rs250 from Rs150 per mmBtu. Those protected consumers who use the gas of 0.6hm3 a month will face a hike of 50 percent in tariffs as there will be a new tariff of Rs300 from Rs200, and those who use the gas of 0.9hm3 will have a hike of 40 percent to Rs350 from Rs250.

For unprotected gas consumers, the government has increased the gas price by 66.67 percent to Rs500 from Rs300 per mmBtu for those who use the gas 0.25hm3 a month. It has hiked the gas price by 41.7 percent to Rs800 from Rs600 for those who use 0.6hm3 gas. Similarly, it increased the gas price by 25 percent for domestic consumers who use 1hm3 per month. They would now pay Rs1,250 per unit from the existing Rs1,000. Domestic consumers who utilise 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 government 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 face an increase of 8.57 percent to Rs3,800 from Rs3,500, while those who utilise over 4hm3 will face increase of 5 percent to Rs4,200 from Rs4,000. The protected category would pay a fixed charge of Rs400 and meter rent of Rs40 and the non-protected category will pay a fixed charge of Rs1,000 up to 1.5hm3 and meter rent of Rs40, while Rs2,000 for exceeding consumption of 1.5hm3 and meter rent of Rs40.

Earlier, the caretaker federal cabinet met here with interim Prime Minister Anwaar-ul-Haq Kakar in the chair and approved the decision taken by the Economic Coordination Committee (ECC) of the Cabinet on the hike in gas prices. On the recommendation of the Ministry of Commerce, the cabinet also approved the transit/ transfer of vehicle spare parts and new tyres used by the Afghanistan Country Office under the United Nations Development Program (UNDP) from Karachi Port to Kabul, Afghanistan.

On the recommendation of the Ministry of Interior, the meeting approved the handing over of Irfan Qadir Bhatti, an accused with dual citizenship, to Norway. The cabinet, on the recommendation of Ministry of Information and Broadcasting, allowed the Pakistan Television Corporation to make payments to foreign broadcasters for broadcasting rights of sports events. The cabinet meeting also approved decisions made in a meeting of the federal cabinet on energy on February 6.

The federal cabinet also granted its assent to impose 25 percent General Sales Tax (GST) on all vehicles manufactured locally above Rs4 million price or above 1,400cc engine capacity or double cabin. “The FBR has estimated to collect Rs4 to Rs4.5 billion through these taxation measures on an annual basis” top official sources confirmed to The News here on Thursday night.

Official sources said that the ECC had approved the summary of the FBR under which all vehicles above 1,400cc were already imposed 25 percent GST but the FBR added another condition that all vehicles above 1,400cc having a price of over Rs4 million would have to pay 25 percent GST. Earlier, vehicles above 1400cc engine capacity were paying 25 percent GST but now the element of price was also incorporated, so vehicles with a price of more than Rs4 million would have to pay 25 percent GST instead of 18 percent. However, for all those vehicles up to 850cc, the GST rate was fixed at 12.5 percent.