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ECC okays up to 143pc increase in gas tariff

Updated September 18, 2018

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ISLAMABAD: In a major decision, the government finally approved up to 143 per cent increase in natural gas tariff with immediate effect on Monday having a cumulative financial impact of about Rs116 billion.

The decision to increase gas rates for all consumer categories was taken at a meeting of the Economic Coordination Committee (ECC) of the cabinet in a manner that partly shifted the burden from residential consumers to all other consumer categories — commercial, industry, power, fertiliser, cement and CNG sectors. The meeting was presided over by Finance Minister Asad Umar.

Ramsha Jahangir
Ramsha Jahangir

An official told Dawn that average gas price had been increased by more than 35pc instead of 46pc determined by the Oil and Gas Regulatory Authority (Ogra) and it would yield Rs95bn for the gas companies. About Rs16bn revenue would flow to the federal government on account of general sales tax. The impact of Rs58bn determined by the regulator but not passed on to the consumers would be carried forward in the next price adjustment, the official said.

Minister for Petroleum Ghulam Sarwar Khan, who announced the ECC decision at a press conference along with Information Minister Fawad Chaudhry, said the two gas companies — SSGC and SNGPL — were operating in profit when the Pakistan Muslim League-Nawaz assumed power in 2013, but it left behind a deficit of Rs152bn after five years. He said it was a difficult decision for the new government in view of higher gas purchase price which could not be sold cheaper.

Petroleum minister says it’s a difficult decision for the new government in view of higher gas purchase price which cannot be sold cheaper

He claimed that 60pc population was using liquefied petroleum gas (LPG) for which import taxes had been rationalised to reduce cylinder price by Rs200, while only 23pc population was using natural gas for which rates had been increased.

Ghulam Sarwar said LPG would now attract only 10pc GST instead of existing 17pc, in addition to 5.5pc advance income tax and regulatory duty at a rate of Rs4,669 per tonne. The price of 11kg gas cylinder, he hoped, would come down to Rs1,400 from Rs1,600 because of supply imbalance.

In view of the political challenge, the government decided to create seven slabs for residential consumers instead of the existing three slabs. The domestic consumers falling in the two highest slabs would be the worst off as they would be charged the highest rate among all consumer categories. Their price has been equalised with imported LNG.

The price for the 6th slab of up to 500 cubic metres and 7th slab of more than 500 cubic metres has been increased by 143pc to Rs1,460 per mmbtu (million British thermal unit) from Rs600. The monthly gas bill of 500 cubic metres will surge from Rs12,500 to Rs30,340 and further up to Rs35,500 with addition of GST. Only two per cent or 226,129 consumers fall in this category.

Likewise, the monthly bill of more than 500 cubic metres will increase from Rs15,000 to Rs36,400 and further beyond Rs42,520 with addition of GST.

A new slab of 50 cubic metres consumption has been created. The monthly tariff for this slab has been increased by 10pc to Rs121 from Rs110 per mmbtu. The monthly bill, excluding taxes, will increase from Rs252 to Rs275. In normal circumstances (other than winters), 3.56 million or 38pc consumers fell in this slab, the minister said.

The price for the next slab of 100 cubic metres has been increased by 15pc to Rs127 from Rs110 per mmbtu and its monthly bill is estimated at Rs551 instead of Rs480. About 2.638m or 28pc consumers fall in this slab.

The tariff for the third slab of up to 200 cubic metres involving 1.74m or 19pc domestic consumers has been increased by 20pc to Rs264 from Rs220 per unit. The monthly bill without GST will be Rs2,216 instead of Rs1,850.

The price for the 4th slab of up to 300 cubic metres (0.436 million or 5pc consumers) has been by 25pc to Rs275 from Rs220 to Rs275 and their monthly bill from Rs2,764 to Rs3,449.

The 5th domestic slab of up to 400 cubic metres (524,391 or 6pc consumers) will see a 30pc increase — from Rs600 to Rs780 per unit. Their monthly bills will jump from Rs10,000 to Rs13,000 and go further up to Rs15,300 with addition of GST.

Likewise, the gas sale price for commercial consumers, including Tandoors, has been increased by 40pc to Rs980 from Rs700 per mmbtu. In fertiliser sector, the gas sale price for feedstock (old consumers) has been increased by 50pc to Rs185 from Rs123 per unit and that for fuel stock by 40pc to Rs780 from Rs600. The petroleum division reported to the ECC that estimated impact of these revisions would be Rs128 per 50kg bag of urea.

The gas price for industrial and captive power plants for registered manufacturers or exporters of five zero-rated sectors — textile (including jute), carpets, leather, sports and surgical goods — was kept unchanged at Rs600 per mmbtu. A new category for these industrial consumers will be created.

The gas sale price for general industrial and captive power plants has been increased by 40pc to Rs780 from Rs600 per unit and that for the power sector by 57pc to Rs629 (which is average prescribed price of SNGPL) from Rs400 per unit.

The gas rate for the cement sector has been increased by 30pc to Rs975 from Rs750 per mmbtu. Rates for the CNG sector in Sindh and Khyber Pakhtunkhwa have been raised by 40pc to Rs980 from Rs700 per unit.

The petroleum minister said CNG stations in Punjab were already using imported LNG which was on the higher side.

Ogra had originally recommended an 186pc increase for the first two slabs of domestic consumers to bring half the average cost of gas to discourage its wastage and a 30pc increase for most of other categories in industry, commercial, power sectors, etc. The government, however, diverted the burden from domestic to electricity, industry, commercial and fertiliser sectors that would indirectly spread out to all consumers and categories.

The ECC decisions will formally be endorsed by the federal cabinet on Tuesday and then sent to Ogra for formal notification. The enhanced rates would be effective immediately but become part of the next month’s bills, the information minister said.

Published in Dawn, September 18th, 2018