The caretaker government of Pakistan has approved an increase in natural gas prices for different categories of consumers, effective from November 1, 2023. The decision was made after the Economic Coordination Committee (ECC) and the Federal Cabinet reconsidered the summary submitted by the Petroleum Division, which followed the advice of the Oil and Gas Regulatory Authority (OGRA).
The government said that the increase in gas prices was necessary to promote the efficient use of the scarce commodity, ensure the sustainability and affordability of the supply chain, and avoid further accumulation of circular debt. The government also cited the challenges of dwindling natural gas reserves, devaluation of rupee, inflation, and imported liquefied natural gas (LNG) as factors that increased the cost of gas.
The International Monetary Fund has been stringent in its emphasis on addressing the deficiency in the gas sector’s circular flow, as part of the standby arrangement.
OGRA had actually issued its Estimated Revenue Requirements (ERR) for the fiscal year 2023-24 for both Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) on 2 June 2023, . According to this determination, SNGPL and SSGC required revenues of Rs 358 billion and Rs 339 billion respectively.
In line with Section 8(3) of the OGRA Ordinance 2002, it was incumbent upon the federal government to instruct OGRA to adjust consumer gas prices in accordance with government policy. This adjustment was to be effective from 1st July 2022 and implemented within 40 days of OGRA’s determination. Regrettably, this revision in consumer gas prices has not been actioned to date. As a consequence of this inertia in price adjustment, the Sui companies have already shouldered the revenue shortfall for the period from July to September 2023. This situation underscores the urgent need for action to rectify this financial imbalance.
“There’s a staggering variation across various non-protected slabs in the new pricing. Penalising solely bulk domestic consumers serves no purpose — it’s akin to treating a symptom rather than the disease,” exclaims Afia Malik, Senior Research Economist at PIDE.
“Circular debt in the gas sector is a reality. The imperative for deregulation in the natural gas sector is clear as day — it’s a crucial step towards addressing this pressing issue. Tariffs must pivot towards a cost-of-service basis, and subsidies and cross-subsidies must be consigned to history to ensure financial viability. The practice of cross-subsidisation across sectors has only served to encourage inefficient use. Piped natural gas is no less than a luxury; its misuse must be curtailed with immediate effect,” adds Malik.
So, what are the new tariffs?
Domestic (Residential) Consumers
The government claimed that it has protected the low-income households and businesses by keeping their prices low or unchanged. For example, there is no increase in gas price for 57% of the domestic consumers who fall in the protected category. The government has also introduced a fixed monthly charge of Rs. 400 for up to 0.25 hm3 consumption. Moreover, the sale price for gas supplies to roti tandoors remains unchanged.
The following table shows the old and new prices for domestic consumers:
| Slabs | Old Rates (Rs./mmbtu) | New Rates (Rs./mmbtu) | Fixed monthly charge (Rs.) |
| Up to 0.25 hm3 | 200 | 300 | 1000 |
| Up to 0.6 hm3 | 300 | 600 | 1000 |
| Up to 1 hm3 | 400 | 1,000 | 1,000 |
| Up to 1.5 hm3 | 600 | 1,200 | 1,000 |
| Up to 2 hm3 | 800 | 1,600 | 2,000 |
| Up to 3 hm3 | 1,100 | 3,000 | 2,000 |
| Up to 4 hm3 | 2,000 | 3,500 | 2,000 |
| Above 4 hm3 | 3,100 | 4,000 | 2,000 |
Other Categories
The government said that it has rationalised the gas prices in North and South regions to create a level playing field for everyone. It has also developed a Regionally Competitive Energy Tariff (RCET) for export industries by consulting with stakeholders. The government said that it aims to discourage captive usage by export and non-export customers and encourage conservation of gas in sectors where gas use is inefficient or where alternate fuels are available.
The following table shows the old and new prices for other categories:
| Category | Old Rates (Rs./mmbtu) | New Rates (Rs./mmbtu) |
| Bulk | 1,600 | 2,000 |
| Sp. Commercial (Roti Tandoor) | 697 | Unchanged |
| Commercial | 1,650 | 3,900 |
| Power (KE, SNPC, EPQL) | – | 1,050 |
| Liberty Power | 2,406 | 3,890 |
| Fertilizer Feed (Engro) | $ 0.7/mmbtu | 200 |
| Fertilizer Feed (FFBQL) | 510 | 580 |
| Fertiliser Fuel | 1,500 | 1,580 |
| Cement | 1,500 | 4,400 |
| Export Ind. Process | 1,100 | 2,100 |
| Export Ind. Captive | 1,100 | 2,400 |
| Non-Export Ind. Process | 1,200 | 2,200 |
| Non-Export Ind. Captive | 1,200 | 2,500 |
| CNG | 1,805 | 3,600 |
The knock off effects
“An upswing in gas prices is a boon for oil and gas exploration firms and gas utilities, fortifying their cash flows. Conversely, it deals a blow to businesses tethered to gas-captive power plants,” states Rao Aamir Ali, Vice President of Research at Arif Habib. “As for its influence on inflation, it directly contributes to an approximately 80 basis points effect,” Ali continues.
Government needs to put strong cut on lavish government expenses instead of gathering money from poor people who already are worried about their kitchens.
Nice Info Keep posting
For all increases in charges, the government and the commentators cite IMF’s conditionalities. Will the government make public in toto the conditionalities laid down by IMF including cuts in expenditure suggested by that body? It is convenient to name IMF for all the burdens imposed by the government.
جو ھوا بہت برا ھوا لیکن اب رونے کا کیا فائدہ
ھم سب کو توانائی کو ضائع ھونے سے حد درجہ بچانے کی کوشش کر نی چاھیے
ماحول کو سرسبز رکھنے کے لیئے جدید تحقیق کے بعد صحیح سمت میں کوشش کرنی پڑتی ہے
جیسے بواءلراورجنریٹر کی گیس کی بچت کے لیے گیس اور ھوا کی اینالاءسس کی مقداروں کا چیک کروانا ھر ماھ بہت ضروری ہے
the government ill policies always suffered common people of pakistan, the elite of pakistan get the way out by different methods but common man getting ruined as always. this drastic increases in gass prices will directly effects the small business units badly hotels bakeries small tea shops how will they manage by the rate increases they also increases the ratio of tax associate with bill amount its cruelties with people of small units business.
gas price increases. will leve no choice except
close the businesses. and shift business to other countries. it’s very difficult to sustain businesses
please reduce commercial gas prices asap
thank you.
very informative