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Ogra determines 46pc rise in gas prices

Updated June 25, 2018

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ISLAMABAD: After almost a four-year freeze, natural gas prices are estimated to jump by an average 46 per cent with effect from July 1 owing to expansion in supply network, induction of imported gas and addition of millions of domestic gas connections on a political basis.

The Oil and Gas Regulatory Authority (Ogra) has forwarded two separate determinations regarding the prescribed prices of two troubled gas utilities — Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) — to the government just before the regulator’s chairperson and a team of senior petroleum division officials left for the United States on a three-week visit.

The increase in prescribed prices is based on estimated revenue requirements of the two utilities for the fiscal year 2018-19 and is worked out keeping in mind various projects under implementation and other expenditures.

The regulator has determined up to 186pc increase in gas rates for the poorest categories of domestic and commercial consumers who are currently cross-subsidised, while the prescribed rates for other categories — industrial, cement, CNG, power and commercial sectors — have been jacked up by 27 to 31pc for the two gas utilities.

Increase based on estimated revenue requirements of troubled SSGC and SNGPL for fiscal year 2018-19

Under the law, Ogra is required to notify final consumer-end prices for each category based on recommendations of the government. The government can change the rates for various consumers by shifting the burden from one consumer category to the other but without affecting the overall revenue requirement determined by the regulator.

Ogra has determined that the SSGC — which serves Sindh and Balochistan — would need Rs167 billion during the next fiscal year to finance its ongoing programmes. Therefore, it has approved an increase of 45.54pc (Rs184.34 per unit) in the average prescribed price to Rs589.09 per MMBTU (million British thermal unit) from Rs404.75.

Likewise, the regulator has approved the 2018-19 revenue requirement for the SNGPL at Rs287bn, necessitating an average prescribed price of Rs629.33 per MMBTU, an increase of 3.37pc (Rs20.57 per unit) from Rs608.76. SNGPL’s service areas cover Punjab and Khyber Pakhtunkhwa.

Ogra has determined gas prices for the poorest domestic and commercial consumers using less than 100 cubic metres per month at Rs294.55 per MMBTU, up by 180pc from Rs105.15. The consumers in 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, a rise of 180pc.

The prescribed price for the third domestic slab of more than 300 cubic metres per month has been raised by 26.4pc to Rs664.52 per unit from Rs525.76 and that of the commercial category by 26.4pc to Rs797.42 per unit from Rs631.

All other categories in larger commercial and industrial units, ice factories, captive power plants, CNG stations, cement and fertiliser plants, public sector power houses and independent power plants will face a 26.4pc increase. Commercial consumers and ice factories will be charged Rs798 per unit instead of Rs631 and industrial consumers, Pakistan Steel, Wapda plants and IPPs Rs611 per unit, instead of Rs484. Captive power plants of industrial units will be charged Rs718 per unit instead of Rs568 and CNG stations Rs822 per unit instead of Rs650.

The highest rate of Rs930 per unit will apply to cement factories that were paying Rs736. The feedstock gas for Fauji Bin Qasim Fertiliser will be Rs156 per unit instead of Rs123.

For SNGPL, Ogra has increased the prescribed price for the poorest domestic and commercial categories by 186pc and for all other categories by about 30pc.

The regulator said it had taken into account increased proportion of LNG in the gas system, local gas constraints and legal challenges arising thereof and believed that all classes of consumers should at least pay the average cost of service or the average prescribed prices.

Published in Dawn, June 25th, 2018