Economic Coor­dination Committee to take up 15pc gas tariff hike today

Updated January 29, 2020

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The ECC is also expected to approve establishment of a trust fund to implement risk sharing facility under third tranche of $10m of a credit line of $140m from the World Bank for the Pakistan Mortgage Refinance Company Limited. — AFP/File
The ECC is also expected to approve establishment of a trust fund to implement risk sharing facility under third tranche of $10m of a credit line of $140m from the World Bank for the Pakistan Mortgage Refinance Company Limited. — AFP/File

ISLAMABAD: The Economic Coor­dination Committee (ECC) is expected to take up approval of up to 15 per cent increase in gas tariff on Wednesday to fulfil its commitments to the International Monetary Fund.

The meeting, to be presided over by PM’s Finance Adviser Abdul Hafeez Shaikh will also consider the establishment of a trust fund to implement risk sharing facility under a $10 million World Bank loan and order the State Bank of Pakistan (SBP) to sells its shares in the House Building Finance Company (HBFC).

A summary moved by the Petroleum Division to the ECC proposed 5-15pc increase in gas tariff for different consumer categories. The ECC had considered the summary on Jan 20 but put the matter on hold owing to the then prevailing controversy over wheat and sugar price hike.

The division in its summary said that under the Oil and Gas Regulatory Authority (Ogra) law, federal government is required to “advise category-wise gas sale prices to Ogra for notification in the official gazette within forty days i.e. Jan 20, 2020”.

It said the division has changed Ogra’s recommendations 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 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 stations (CNG).

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

At existing gas prices, the two companies faced a cumulative loss of about Rs35bn. The division said that Ogra’s recommendations had been examined and revisions were made in various categories and heads to protect the revenue requirement determined by the regulator.

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

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

In a significant move, the division also recommended the fertiliser plants be provided fuel at Regasified Liquefied Natural Gas Price – Rs1,672/mmBtu being current price of LNG.

Also, the minimum billing volume for domestic and special commercial consumers (tandoors) would be revised from 40cm per month to 50cm per month 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, ice factories and 1,000cm per month for other sectors using average gross calorific value (GCV) of system gas in the country.

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

The sale price of gas for the Liberty Power supplied by the SNGPL and for the Uch Power supplied by the Oil and Gas Development Company Ltd will be determined in accordance with already-approved pricing formula/mechanism.

The ECC is also expected to approve establishment of a trust fund to implement risk sharing facility under third tranche of $10m of a credit line of $140m from the World Bank for the Pakistan Mortgage Refinance Company Limited.

The bank has already disbursed around $130m in two tranches for Housing Finance Project.

Under another summary moved by the Ministry of Finance, the ECC is likely to direct the SBP under sub-section 6(A) of section 17 of SBP Act 1956 to sell its shares in the HBFC.

Further, the meeting is expected to allow out-of-court settlement for the pending Coniston against Pakistan Steel Mill dispute that led to arrest of Pakistan National Shipping Corporation ships in South Africa a couple of years ago.

The committee will consider the approval of about Rs180m worth of technical supplementary grants and take up a presentation on ‘Comprehensive Policy for Enhancement of Cotton Production in the Country’.

Published in Dawn, January 29th, 2020