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Friday August 19, 2022

Gas tariff hike awaits PM nod

August 04, 2022

ISLAMABAD: A government decision to increase gas tariff has yet to be implemented for over two months as the Prime Minister, who is also the minister in-charge of the petroleum division, has not given his nod, officials said on Wednesday.

The Economic Coordination Committee of the Cabinet, in a meeting held on July 7, 2022, had approved an increase in gas rates by 43-353 percent percent.

“Once we have a piece of advice from the in-charge minister of the petroleum division, then we will act accordingly,” an official said. “The only change the ECC meeting that met on July 7, 2022, suggested was lowering the rate of export and non-export industry by Rs100 per MMBtu. This would be discussed with the PM and then it will be finalized for submission to ECC again.”

It worth mentioning that the OGRA issued its determination of Estimated Revenue Requirements for FY 2022-23 on June 3, 2022, for both SNGPL and SSGC. Under the OGRA ordinance, if the government doesn’t respond to the determination within 40 days, then the decision of the regulator is notified automatically. But it is interesting to note that 40 days have elapsed but OGRA has not notified its determination with a hike for gas tariff by 40 percent for SSGC consumers and 45 percent for SNGPL consumers. However, 61 days have now elapsed since the determination about the hike in gas tariff by OGRA.

The existing slab structure of 7 slabs has been revised into 5 slabs by consolidating the last 2 existing slabs. The slab up to 0.4 hm3 has been merged with slab up to 0.5 hm3 and the rate for the merged slab has been worked out at Rs173 per MMBtu. There is no minimum charge in the domestic category and no change is in the price for the slab up to 1 hm3. This is how the government has protected the poorest consumers.

However, the preceding slab benefit has been maintained up to a consumption of 1 hm3. Beyond the threshold of 1 hm3, the preceding slab benefit has been discontinued. The last 2 slabs with the highest consumption i.e. consumption up to 3 hm3 and above representing the affluent consumers will now pay closest to the average cost of RLNG. And the highest consumption slab will not be allowed the benefit of lower slabs; in order to ensure this, it is proposed that if the consumption in any of the preceding eleven months and the billing month exceeds the level of 2 hm3, the rate of the highest slab will be applicable. This mechanism will be applied prospectively with effect from July 1, 2022 in such a manner that the number of preceding months for this calculation will increase from zero to eleven by June, 2023 and the bulk consumers will be charged at the average price prescribed by OGRA.

For domestic consumers, the gas tariff, the consumers who consume gas up to 0.4 hm3 will continue to pay Rs173 per MMBtu. However, the consumers who consume the gas up to hm3 in one month will witness a 43 percent hike in tariff as their tariff will be at RS173 per MMBtu from the existing Rs121 per MMBtu. However, the consumers who consume up to 1 hm3 will face no hike in their tariff as their gas rates will continue to be at Rs300 per MMBtu. And those domestic consumers who consume gas up to 2hm3 will face a rise in tariff by 26 percent to Rs696 per MMBtu from the existing RS553 per MMBtu. And those consumers who use the gas up to 3hm3 will face an increase in gas tariff by 151 percent to RS1856 per MMBtu from RS738 per MMBtu. And those consumers who use the gas above 3hm3 and up to 4hm3 will also face the phenomenal hike in gas tariff by 335 percent to Rs3712 per MMBtu from RS1107 per MMBtu and those would use above 4hm3 would also pay Rs3712 per MMBtu.

For other categories, the ECC approved the gas tariff for bulk consumers at Rs928 per MMBtu against the existing tariff at Rs780 per MMBtu.

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