ECC likely to take final decision about future gas prices

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet is set to decide either to fully pass on the hike in gas prices to gas consumers already worked out by the Oil and Gas Regulatory Authority (OGRA) or to give relief to them in the form of subsidy.

Official sources at the Petroleum Division on condition of anonymity said that the next ECC meeting scheduled for Wednesday will make the final decision about the future prices of gas prices. They said that the upcoming ECC meeting is likely to issue advice to notify future gas prices pending for a long time as the caretaker government failed to recommend gas prices. The only solution lies with Pakistan Tehreek-i-Insaf (PTI) government in the form of subsidy if it is interested in avoiding a price hike after a decision to increase gas prices by OGRA, said sources.

Earlier, the Oil and Gas Regulatory Authority (OGRA), while announcing a hike of Rs234 per Million British Thermal Unit (MMBTU) in the average gas price had set the new gas price at Rs629/MMBTU. In a decision dated June 21, 2018, OGRA had approved the hike in the gas prices by 30 to 186 per cent for the domestic category of gas consumers while approving a 30 per cent increase for gas consumer’s category of commercial, industrial, CNG, fertilizers and the power sector.

It is relevant to mention here that OGRA, while jacking up gas prices for domestic consumers by 186 per cent and a 30 per cent record increase for commercial, industrial, power and other sectors has raised average gas price by Rs234 per Million British Thermal Unit (MMBTU) and fixed the new gas price at Rs629/MMBTU. And, with effect to this decision, it is estimated that the masses will have to bear a Rs160 billion additional financial expense.

Sui Northern Gas Pipelines Limited (SNGPL) will collect Rs11 billion from its consumers and Southern Gas Company Limited (SSGCL) will collect Rs10 billion on account of gas theft and leakages. Similarly, to gain public/voters sympathy during upcoming general elections in 2018, the former PML-N government launched new gas schemes.

Although former Pakistan Muslim League-Nawaz (PML-N) government artificially maintained the gas price for the last four years, ex-Prime Minister Shahid Khaqqan Abbasi at the end of the constitutional tenure of his government during the month of May 2018 has approved to collect Rs117 billion from gas consumers in four instalments.

A copy of ECC’s agenda available with Pakistan Today has informed that a meeting of the ECC of the cabinet will be held on Wednesday, 29 August 2018 at 0930 hours in the Cabinet Room, Prime Minister’s Office, Islamabad to take up five-point agenda. The minister for finance and revenue will chair the meeting.

According to the five-point agenda of ECC meeting, circular debt and its impact on power sector, gas pricing, Pakistan State Oil (PSO) financial health and liquidity position, DAP for Kharif crop-2018 and measures to address the shortage of Urea fertilizer will be taken in Wednesday’s meeting of the ECC.

“All concerned ministers/Divisions are requested to provide 65 copies of summaries/working papers in respect of their agenda mentioned above, in light of rule 18(1) of the Rules of Business, 1973, for its transmission to members of the ECC,” said ECC agenda issued by Joint Secretary Ghulam Muhammad, dated 27 August, 2018.

The sources further said that although OGRA had already taken a decision of 30 to 186 per cent hike in gas prices on 21 June 2018, however, OGRA Chairperson Uzma Adil Khan so far remained not willing to issue notification of hike in gas prices apparently to avoid annoyance of next government of Pakistan Tehreek-i-Insaf (PTI). And, caretaker government left the matter for the upcoming government to take a decision in this regard though OGRA Ordinance does not permit for this.

Interestingly, following a decision by OGRA about the new gas prices, the federal government is bound to issue an advice to OGRA about new gas prices in 40 days as per OGRA Ordinance. And, in case of absence of advice from the government, OGRA is bound to issue an average gas price notification. However, chairperson OGRA Uzma Adil Khan remained reluctant to implement the OGRA Ordinance while Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) are facing serious financial problems.

At present, SNGPL and SSGCL are financing various gas projects with loans obtained from banks. But, if OGRA’s decision of increasing gas prices by 30 per cent to 186 per cent is implemented, the two gas companies will be able to earn revenue worth Rs160 billion and mitigate their financial woes.

Sources said that OGRA had earlier forwarded a copy of the decision about the new gas prices to the federal government and also made it clear that no change will be made in the said decision of OGRA regarding the gas price hike.

Available copy of the OGRA’s decision has further transpired that the gas consumers of the country will have to bear burden due to no change in gas prices during the last four years. More, provision of cheapest gas to domestic gas consumers has been ended as the gas tariff for domestic gas consumers has been increased by 186 per cent to end the discriminatory attitude towards other gas consumers deprived of a natural gas facility.

OGRA in its new decision has made a 50 per cent increase in the gas price and fixed it at Rs314/MMBTU for the first slab of domestic consumers, while OGRA has jacked up the price by 300pc for the second slab and fixed the price for the second slab at Rs629/MMBTU, and price for the third slab has been set at Rs629/MMBTU after a 30 per cent increase.

Furthermore, the tariff for Roti Tandoor has witnessed 186 per cent increase, the tariff for the gas to be used in general industry, power sector, cement, CNG and fertilizer plants has been increased by 30 per cent with the approval of OGRA.

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Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected]
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