Govt may maintain gas sale prices from July 1

ISLAMABAD: The government may maintain the natural gas sale price from July 1, 2024, against the 10 percent reduction in system gas price recommended by Ogra so that prior years’ shortfall that has reached Rs1,500 billion could be reduced by Rs100 billion in a staggered manner.

This will also help the government to pave way for the IMF $6-8 billion loan programme. The government may also maintain the gas prices for the fertilizer sector but will increase the gas price for captive power plants to 2,900 or 3,000 per MMBTU from the existing price of Rs2,750 per MMBTU under IMF diktat.

“The IMF has already asked the government to hike the gas tariff of captive power plants on par with RLNG tariff of Rs3,700 per MMBTU by January 1, 2025,” senior officials of the Energy Ministry told The News. “The remaining increase of Rs700-800 per MMBTU will be made by January 2024.”

The Fund keeps arguing, the officials said, captive power plants have 30-35 percent efficiency and most of the CPPs were installed in the Sui Southern network. The IMF has also asked the government to connect all the CPPs with the national grid electricity. “The said plants, by using natural gas as input fuel, not only generate electricity for their industrial consumption but some of them also sell the electricity generated by natural gas to electric power distribution companies (Discos).”

If we maintain the gas prices, the officials said, the government would have Rs100 billion surplus revenue which is proposed to be used in curtailing the previous years’ deficit. The deficit has now swelled to Rs1,500 billion, which is high and it will take 7 years to be erased if we keep curtailing Rs100 billion every year. The IMF is sensitive about the circular debt in the gas sector that has reached Rs2,900 billion.

However, the political entities in the government want to slash the 10 percent gas sale price from July 1, 2024 to get more applause from the masses. The debate on this issue, however, is going on whether to reduce the gas tariff or maintain it at the existing level.

“With the proposed hike in gas prices for captive power plants, the Sui Gas companies will have an additional revenue of Rs100 billion a year.”

Currently, the government does not extend the subsidy to any domestic consumer for using natural gas as it is the industrial consumer or high-end domestic consumers who are giving the net cross-subsidy of Rs110 billion per annum to protected and some non-protected consumers. The fund also asked the government functionaries to ensure gas tariff adjustments twice a year, firstly from July 1 and secondly from January 1, so that new surge in gas circular debt could not emerge.