Gas prices may go up by 20-42pc from July 1

ISLAMABAD: The top mandarins of the Petroleum Division are currently engaged on the gas pricing formula to be effective from July 1, 2019, as existing one is based on 7 slabs with no benefits that exposed the end consumers to inflated gas bills by 100-200 percent in the months of January and February.

Earlier, the PTI government had increased the gas prices by 10-143 percent. Now more increase from July I, is inevitable keeping in view the loss of the gas companies that will jack up by up to Rs240-250 billion by June, 30 2019.

However, the government wants to pass more increase by 20-42 percent with one slab benefit from July 1, 2019 with an aim to reduce the monetary pain to be inflicted upon gas consumers.

But, the spike in gas tariff by 18 percent, 35 percent, 42 percent and even 94 percent have so far been worked out by the Petroleum Division officials depending upon how much the government gives the subsidy to gas companies to cover up their losses.

Oil and Gas Regulatory Authority (Ogra) is going to announce new gas prices in late April or early May.

To this effect, according to top official, Federal Minister Ghulam Sarwar Khan on April 9 held an important meeting of the top officials of Petroleum Ministry and asked them to slash the slabs from 7 to 5 with some rationale prices for all slab categories and also extend at least one slab benefit to the end consumers from July 1, 2019.

In the meeting, minister was told if one slab benefit is extended to the gas consumers, both the gas utilities-- Sui Northern and Sui Southern -- will incur a loss of Rs20 billion.

In the meeting held on April 9 afternoon, the minister had been recommended to first wait for the decision by Ogra about next prescribed gas prices of both the gas companies for 2019-20 and then decide accordingly. Meanwhile IMF talks with Pakistan may further shape up on increase in utility prices.

The official said that the PTI government is desperate for loan programme from IMF to get out of economic morass. “The top mandarins of the Petroleum Division have worked out under first scenario the 18 percent increase to meet the loss of Rs70 billion only in the ongoing financial year 2018-19 both the gas companies — Sui Northern and Sui Southern -- are facing.”

If the revenue requirement, the official said, for next financial year 2019-20 that the Ogra is going to work out soon, is kept in view at estimated Rs156 billion, the tariff increase would stand at about 42 percent.

If the losses of the gas companies of worth Rs143 billion in preceding years are considered in the tariff, the gas rate would go up to 35 percent and more importantly in the fourth scenario, if all the losses of the gas companies that stand at Rs368 billion are added, the tariff would go up to 94 percent.

However, spokesman for Petroleum Division said that government is inclined to increase gas tariff by 18-20 percent to cope with the loss of the gas companies in the current financial year. However, he showed his inability when asked for gas tariff raise if losses of preceding years are included. However, he said that Ogra will determine the revenue requirement for 2019-20 which will be taken care of when new gas tariff is to be effective from July 1, 2019. However, the official said that now it depends where the forthcoming talks with IMF end with regard to size of gas tariff hike to be effective from July 1, 2018.

“The PTI government will try from pillar to post to limit the increase in the gas tariff by up to 18-30 percent and will not go beyond it but IMF will ask the government to increase the tariff at the maximum to substantially reduce the losses of the gas companies.”

However, the official said, in the earlier interactions of the government’s economic managers with Fund officials, IMF is exerting pressure to do away with the subsidy to gas consumers and charge the full cost of gas from every consumers that stands at Rs631.86 per MMBTU for consumers of Sui Northern and Rs623.62 per MMBTU for consumers of Sui Southern.

“The gas companies are currently charging average Rs512 per MMBTU from the consumers which is still less by Rs120 per MMBTU from the full gas cost of Rs631.86 per MMBTU for Sui Northern gas consumers. The official said that the government may revise the slabs in the gas pricing formula as the existing 7 slab formula has proved very detrimental to the consumers.”

In the recently held cabinet meeting, the gas tariff increase issue is discussed.