Political pressure forces govt to put on hold gas tariff hike

Updated January 21, 2020

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A second session of the ECC of the cabinet was called in the evening to consider a summary by the energy ministry to increase gas prices. — Reuters/File
A second session of the ECC of the cabinet was called in the evening to consider a summary by the energy ministry to increase gas prices. — Reuters/File

ISLAMABAD: Owing to political pressure on the rising wheat and sugar prices, the government on Monday withheld an announcement to increase natural gas tariff by 5-15 per cent to avoid public criticism.

According to informed sources, a second session of the Economic Coordination Committee (ECC) of the cabinet was called in the evening to consider a summary by the energy ministry to increase gas prices.

Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh presided over two meetings of the ECC in the morning and evening.

The officials concerned of the energy ministry (petroleum division) and the Oil and Gas Regulatory Authority (Ogra) were on standby at their offices to process the notification about gas price hike.

They were, however, relieved at about 8pm with the message that the ECC had deferred the decision owing to the increasing pressure on wheat and sugar prices.

ECC defers decision to avoid public criticism over rising wheat, sugar prices

The sources said Ogra would be issued a letter by the petroleum/cabinet division to put on hold the gas price hike notification for a few days to release the public pressure given the fact that the law required automatic notification of gas price adjustment in case of government’s failure to respond to the Ogra-determined rates within 40 days.

The summary seen by Dawn suggests the petroleum division had reported to the ECC that under the Ogra law, the federal government was required to “advise category-wise gas sale prices to Ogra for notification in the official gazette within forty days i.e. 20th January 2020”.

Under the summary, the petroleum division had changed the recommendations of Ogra by reducing the proposed price increases for the poor and lower middle class. The summary, however, proposed about 400pc increase in meter rent for domestic consumers from Rs20 per month to Rs80. The petroleum division said the meter rent was last fixed in 1997.

The summary proposed a 5pc increase in gas tariff for domestic consumers with lower consumption, 12pc increase for power sector plants and 15pc increase for industrial captive power plants and compressed natural gas (CNG) stations.

The petroleum division said Ogra had on Dec 11, 2019 determined the revenue requirement of Rs274.2bn for Sui Northern Gas Pipelines Limited (SNGPL) and Rs282.9bn for Sui Southern Gas Company Limited (SSGCL).

At the existing gas sale prices, the two companies faced a cumulative loss of about Rs35bn in revenue shortfall.

The petroleum division said Ogra recommendations had been examined and revisions had been made in various categories and heads to protect the revenue requirement determined by the regulator.

Besides the above increases, the petroleum division envisaged in its summary gas tariff to all zero-rated general industry and their captive power plants at $6.5/mmBtu (Rs1,000/mmBtu) regardless of location (i.e. both SNGPL and SSGCL).

For captive power other than zero-rated industry and CNG, a tariff increase of 15pc was proposed.

In a significant move, the petroleum division recommended that fertiliser plants should be provided fuel at RLNG price (Rs1,672/mmBtu) being current price of LNG (liquefied natural gas).

Also, the minimum billing volume for domestic and special commercial consumers (roti-tandoors) will be revised from 40cm per month to 50cm for which the bill against gas charges will be Rs220 per month.

Likewise, the minimum monthly charges will be determined by Ogra considering consumption of 140cm per month for bulk domestic consumers, commercial sectors and ice factories and 1,000cm per month for other sectors using average GCV (gross calorific value) of system gas in the country.

The summary said the prices approved for consumers of SNGPL and SSGCL would also be made applicable for fertiliser and power sector consumers to whom gas was supplied directly from fields by the Mari Petroleum Company Limited and Pakistan Petroleum Limited.

The sale price of gas for Liberty Power supplied by SNGPL and for Uch Power supplied by OGDCL will be determined in accordance with the already approved pricing formula/mechanism.

Published in Dawn, January 21st, 2020