Summary of increase in gas price resubmitted

ISLAMABAD: The Petroleum Division has resubmitted a summary proposing an increase of up to 50 percent in gas sale prices to the interim cabinet, aligning with the demands of the International Monetary Fund (IMF).

An anonymous official from the Petroleum Division disclosed that it is highly likely the interim cabinet will approve the gas sale prices for 12 categories of consumers, both protected and non-protected, within the current month of September.

Following cabinet approval, the Petroleum Division intends to announce the consumer sale prices categorized by consumer type, effective from July 1, 2023.

On June 3, 2023, the Oil and Gas Regulatory Authority (OGRA) recommended a 50 percent increase in gas prices for consumers of the Sui Northern Gas Pipeline Limited (SNGPL) and a 45 percent increase for the Sui Southern Gas Company (SSGC).

50% hike expected in gas prices soon

The previous Pakistan Democratic Movement (PDM) government did not raise gas prices, which was considered a violation of the law. Under the OGRA Ordinance 2022, the federal government is obligated to advise the regulatory authority on minimum charges and sale prices for each retail consumer category for official gazette notification within 40 days.

In a recent press conference, the Interim Minister for Energy, Muhammad Ali, stressed the inevitability of raising gas rates ahead of winter to address the mounting circular debt in the gas sector, increasing at a rate of Rs350 billion annually. The gas sector’s outstanding debt, including interest, has reached Rs2.7 trillion.

The most recent revision in gas tariffs occurred on February 13, 2023, when the PDM government approved an increase of up to 113 percent in natural gas prices to recover Rs340 billion from consumers, effective from January 1, 2023.

Sources have indicated that the IMF has also urged the implementation of the weighted average cost of gas (WACOG) to fully recover Re-Gasified Liquefied Natural Gas (RLNG) prices from domestic consumers. This approach involves calculating the gas price by considering both imported LNG and local gas prices, determining an average price, and setting consumer-specific prices accordingly.

SNGPL is required to recover Rs245 billion of RLNG diversion to the domestic sector during the period from July 2018 to April 2023.

According to OGRA’s determination, SNGPL’s average prescribed price is set to rise by 50 percent, amounting to Rs415.11, while SSGC’s average prescribed price will see a 45 percent increase, reaching Rs417.23. This substantial surge primarily accounts for the cost of gas, constituting over 85 percent of the determined price.