Gas price hike to push November inflation beyond 28%

WEB DESK: In November, the Consumer Price Index (CPI)-based inflation is projected to surge to 28.26 per cent, surpassing the October figure of 26.9 per cent, primarily attributed to an uptick in gas prices, as reported by JS Global on Thursday.

JS Global noted that the CPI readings for Nov-2023 are likely to be significantly influenced by the gas prices incorporated into the monthly index calculation.

Anticipating a CPI of 28.26 per cent for Nov-2023, with a month-on-month increase of 1.86 per cent, the brokerage house acknowledged that the 1 per cent weighted head item could potentially fluctuate the headline CPI within the range of 27 per cent to 30 per cent.

The expected range was derived following the recent publication of SPI data, indicating a substantial 480 per cent increase in gas prices to Rs1,700/mmbtu.

While the weighted average of residential gas prices did not experience a corresponding increase, JS Global suggested that the significant rise could be attributed to the inclusion of fixed charges in gas utility bills.

On October 23, the interim government approved a noteworthy increase in natural gas tariffs, reaching up to 193 per cent, in compliance with a condition set by the International Monetary Fund (IMF).

The interim government reiterated that the delay in revising gas prices, pending since July 1, 2023, resulted in a revenue shortfall of Rs46 billion from July to September 2023.

According to Business Recorder, failure to act would potentially escalate this shortfall to Rs395 billion by June 2024. The government also warned of a Rs210 billion deficit in the current winter due to the diversion of RLNG.

Following the approval, the Oil and Gas Regulatory Authority (Ogra), in alignment with federal government policy guidelines, notified the effective natural gas sale prices from November 1, 2023.

However, JS Global’s Thursday report indicated that despite the hike in gas rates, a decline in Petroleum, Oil, and Lubricants (POL) product prices is expected to provide some relief in November.

“The remaining 4 per cent decline in POL product prices is anticipated to be reflected this month, following a 4 per cent decline in the preceding month,” the report stated.

Conversely, while food inflation is on an upward trend, the pace is expected to remain relatively slower at 100 basis points month-on-month, compared to the average of approximately 250 basis points per month witnessed in CY23 YTD.

This is attributed to a respite in fuel prices and reduced pressure from the Wholesale Price Index (WPI).