ISLAMABAD, Sept 1: The World Bank has asked the government to redefine lifeline gas consumers by limiting their subsidized consumption within 30-50 cubic meter per month range instead of existing 100-200 cubic meter.

A senior government official told Dawn that in a recent letter the Bank has advised the government to reduce the size of the first slab from 100 cubic meters to 50 cubic meters in the winter and 30 cubic meters during rest of the year.

It also wants that second domestic consumer slab of 101-200 cubic meter should have no subsidy at all. The subsidy to the first slab should also be made part of the budget and not financed through the gas tariff.

The World Bank has also stressed that the structure of tariffs should approach the internationally observed cost- reflective pattern of having decreasing tariff starting from residential (highest), commercial, small firm, large firm and large users.

At present, first 100 cubic meter gas is charged at Rs69.31 per mmbtu (million British thermal unit) from domestic consumers and the next slab at 101-200 cubic meter at Rs104.42 per mmbtu. Beyond this limit, the domestic gas rate goes over Rs167 and Rs218 per mmbtu.

Under the gas tariff rationalization plan, the future tariff increases of over 70 per cent would be applicable only to higher consumer categories. The real problem, according to the World Bank, is that all the consumers irrespective of their consumption are enjoying this subsidy.

Total economic cost of this subsidy to household is estimated at Rs9 billion per annum and is largely due to the first two slabs of the retail tariff. The first slab accounts for some 54 per cent of the consumers in the winter and 82 per cent in the other months.

Two-thirds of the gas is sold under the first slab rate and 90 per cent under the first two slabs because consumers in higher slabs also benefit from the subsidized gas. As such, the gas price subsidy to households benefits higher income urban families disproportionately, creating pro-rich subsidy inequalities.

The Bank is of the view that the first slab quantity is very substantial, representing about six bottles of LPG.

Social protection would thus be earmarked to about 30 per cent of the consumers, says the Bank adding that eliminating the subsidy would require an increase in average gas tariff of about 65-70 per cent.