ISLAMABAD, July 16: The federal government is expected to increase natural gas prices by an average of two per cent for all consumers within the next few days, a senior government official said here on Wednesday.

“The revision (in gas tariff) will take place in a few days time,” Secretary Petroleum M. Abdullah Yousuf told Dawn.

He said the impact of revision would not be as high as expected earlier mainly because of two factors — strengthening of the Pakistani currency against dollar and less than expected increase in international oil prices.

Mr Yousuf said the government has linked well-head gas prices with international oil prices and consumer prices are accordingly revised on a biannual basis.

“Obviously when input costs increase the consumer prices will increase. I am not concerned with the numbers but the system will not be derailed,” he said when asked how much increase in tariff would take place.

When asked as to why the last tariff revision due in March did not take place despite agreements with the International Monetary Fund (IMF), the secretary said: “We have delayed it but we cannot run away from the system which is already in place and is duly approved.”

Under various covenants with the World Bank and the IMF, the government is required to revise natural gas consumer prices on a biannual basis to remove cross subsidies completely by 2006.

Besides international market variation, the government has also put in place a system to bring the price of gas being produced from Sui field at par with other gas fields whose production is directly linked with the international oil rates.

The two IFIs have been insisting since early this year to implement the decision of biannual tariff revision but the government has been delaying implementation due to political considerations.

Another senior government official explained that proposed gas price increase would be with prospective effect, i.e., from the date of announcement and not with retrospective effect, i.e., from March 31 when the upward review actually became due.

Under an agreement with the World Bank on dismantling of pricing agreement of Pakistan Petroleum Limited (PPL), the government has to increase gas tariff between 10 and 16 per cent after every six months for domestic sector which it had said it believed was subsidised to the extent of 130 per cent.

The gas rates for domestic consumer slab of 3.56-7.1 MMBTU increased from Rs65.58 in October 1999 to Rs100.73 in October 2002 while the rate for more than 10.86 MMBTU increased from Rs107.58 to Rs201.45 per month in October 2002. This calculates to between 35 per cent and 88 per cent in three years.