Power Division finalises gas tariff hike today

ISLAMABAD: The government has assured the IMF that it will not add more to the existing circular debt in the gas sector currently standing at Rs180 billion.

In order to honour its word, the government will increase the gas and power tariff from July 1. The power tariff will be increased by Rs1.50 per unit from July 1, 2019 determined by the National Electric Power Regulatory Authority (Nepra).

The Petroleum Division held exhaustive meetings on Saturday and Sunday to work out gas tariff for domestic and other categories of consumers such as industrial, commercial, CNG and power sectors.

During these meetings, the authorities examined the Ogra’s determination to raise gas tariff for 2019-20 and will finalise the tariff today (Monday). For industrial, commercial, CNG and power sectors, the Ogra determined gas hike by 31 percent.

“Whatever the gas prices is to be worked out by the Petroleum Division will be pitched in the ECC and then the federal cabinet for approval,’’ a Petroleum Division top official, who was also part of weekend meetings, told The News.

However, he refused to share exactly what the gas tariff will be, saying different scenarios are under consideration that will be pitched in the ECC meeting that is to recommend to the federal cabinet for approval. And by Monday, (today), it would be sorted out.

Under one of the prior actions, the official said ensuring no increase in circular debt to qualify for IMF loan program of $6 billion, the government will increase the tariff ensuring zero increase in circular debt from now onward as the existing circular debt stands at Rs180 billion.

“We will certainly hike the gas tariff but less than the increase determined by the OGRA for the domestic gas consumers and will also achieve the target of zero increase in circular debt determined by the IMF. However, the gas consumers will be provided with one slab benefit,” he maintained.

“If we reduce the gas tariff for domestic consumers, the burden will be shifted to the industrial, commercial, CNG and power sectors. The more we reduce the tariff for domestic consumers, the more we increase the tariff for bulk consumes such as CNG, Industrial, commercial and power sectors.”

The regular has allowed the gas companies to pass their 1/5th of the previous year’s shortfall on to the end consumers. This is how the circular debt of Rs180 billion will be made zero by passing on to consumers in three to five years.

According to Ogra, the main reason for increase in the prescribed gas price was the cost of gas, mainly due to the current exchange rate of Rs150 against a dollar. The combined impact of increase in the prescribed price of both companies for recovery from consumers has been estimated at about Rs60 billion.

The Ogra recommended to the government to increase rates in a manner that first two slabs of domestic and special commercial consumers should pay at least half of the average cost of gas that are over-subsidized at present.

The third slab (100-200 cubic meters) should be charged 75pc of the average cost of service, the fourth slab 100pc and the top category (over 300 cubic meters) 150pc.

In doing so, the regulator worked out an increase of 205pc for the first (lifeline) slab consuming less than 50 cubic meters per month to Rs369 per MMBTU from Rs121. The monthly bill of this category (about 18pc of total consumers) will increase by 188pc to Rs789 from Rs274.

The rate for the second domestic slab (50-100 cubic meters) has been proposed at Rs369, instead of Rs127 per MMBTU, up by 191pc. The monthly bill of this category of 29pc consumers will increase by 183pc to Rs1,555 from Rs550.

The regulator worked out the rate for consumers using 100-200 cubic meters per month at Rs553 per MMBTU, instead of Rs264, an increase of 110pc. The monthly bill of this category of 32pc consumers will increase by 74pc to Rs3,854 from Rs2,215.

The next slab of 201-300 cubic meters per month has been proposed at Rs738 per MMBTU, instead of Rs275, showing an increase of 168pc. The monthly bill of this category will increase by 101pc to Rs6,918 from Rs3,449. About 12pc consumers fall in this category.

Ogra worked out an increase of 42pc for consumers using 300-400 cubic meters per month to Rs1,107 per MMBTU from Rs780. In contrast, the regulator worked a reduction of 24pc in existing rates of consumers using more than 400 cubic meters per month to Rs1,107 per MMBTU from Rs1,460.