Gas rates to be increased by 46 per cent
05 September, 2018
ISLAMABAD: Prime Minister Imran Khan on Tuesday gave a go-ahead for increasing natural gas rates by an average of 46 per cent as determined by the Oil and Gas Regulatory Authority (Ogra) in June and ordered steps to control annual gas theft of Rs50 billion.
Presiding over a briefing on gas sector, the prime minister asked the petroleum division to get it approved from the forum concerned and clear the backlog of issues which have piled up when he was explained about the need for gas tariff increase.
Additional secretary in charge of petroleum division Mian Asad Hayauddin briefed the prime minister, in detail, about the existing situation vis-à-vis demand and supply in the oil and gas sectors, rationalisation of gas sale prices, recovery of receivables and inability of the previous government to award any exploration licence in the past five years. Minister for Petroleum Ghulam Sarwar Khan also attended the briefing.
A petroleum division official explained that a summary for the gas tariff increase was placed before the first meeting of the Economic Coordination Committee (ECC) last week but Finance Minister Asad Umar desired that it should be taken up for a decision later with the approval of the prime minister.
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Now an improved version of the summary will be taken up with the ECC for approval before the issuance of a formal notification of the consumer-end gas price with the endorsement of the federal cabinet.
“There is no other way out,” said the official when asked if the prime minister was convinced about the gas price increase when he had been talking about reducing the burden on common people.
Last week the two gas companies – Sui Southern Gas Company (SSGP) and Sui Northern Gas Pipelines (SNGP) – had requested the government to implement gas price hike determined by the regulator to bridge their deficits and improve cash flows.
The SNGP had explained that it was purchasing natural gas from about 40 gas producers at an average rate of Rs629 per MBTU (Million British Thermal Unit) and selling at Rs399 per unit, with a net loss of about Rs230 per unit.
It was reported that SNGP’s receivables stood at Rs165 billion as of Aug 20, 2018 compared to Rs171 billion payables. The receivables of SSGCL stood at Rs203.567bn against its payables of Rs148.786bn.
The prime minister was also updated on the construction and operationalisation of Tajikistan-Afghanistan-Pakistan-India (TAPI) pipeline and Pak-Iran gas pipeline along with other significant projects to meet growing energy needs.
Mr Khan was informed that non-implementation and frequent altering of oil and gas sector policies had affected investors’ confidence, leading to non-awarding of exploration blocks during the past five years. He directed that a comprehensive plan of action with delineated timelines should be submitted at the earliest to address various issues of the oil and gas sectors.
He was given a detailed view of a gas price freeze over the past five years and the 46pc increase in prescribed gas price determined by the regulator on June 24.
The increase in prescribed prices are based on estimated revenue requirements of the two utilities for fiscal year 2018-19 and are worked out keeping in mind various ongoing projects and other expenditures.
Up to 186pc rise
The regulator determined up to 186per cent increase in gas rates for poorest categories of domestic and commercial consumers, while the prescribed rates for other categories – industrial, cement, CNG, power and commercial – have been jacked up by 27 to 31 per cent for the two companies.
According to Ogra, the SSGC that serves Sindh and Balochistan will need Rs167 billion during the next financial year to fund its ongoing programmes.
Therefore, it has approved 45.54pc (Rs184.34 per unit) increase in the average prescribed price from its existing rate of Rs404.75 to Rs589.09 per unit.
Likewise, the regulator approved the 2018-19 revenue requirement for SNGP, which serves Punjab and Khyber Pakhtunkhwa, at Rs287bn, necessitating an average prescribed price of Rs629.33 per MBTU, up 3.37pc (Rs20.57 per unit) from its existing price of Rs608.76 per unit.
Ogra determined the gas price for the domestic and commercial consumers using less than 100 cubic metres per month at Rs294.55 per unit (180pc increase from Rs105.15 per unit), while the second slab using up to 300 cubic metres per month (both commercial and residential) would be charged Rs589.09 per unit instead of Rs210.31.
The prescribed price for third domestic slab of more than 300 cubic metres per month would be jacked up by 26.4pc and charged at Rs664.52 per unit instead of Rs525.76 while the same consumption in commercial category would be charged at Rs797.42 per unit instead of Rs631 per unit, showing an increase of 26.4pc.
All other categories in larger commercial, ice factories, industrial, captive power, CNG stations, cement plants, fertilizer, public sector power houses and independent power plants will see a 26.4pc increase.
For example, the commercial consumers and ice factories will be charged at Rs798 per unit instead of Rs631, while industrial consumers and Pakistan Steel, Wapda plants and Independent Power Producers (IPPs) will be charged Rs611 per unit instead of Rs484, captive power plants of industrial units will be charged Rs718 per unit instead of Rs568 while CNG stations will be charged Rs822 per unit instead of Rs650 per unit.