Dar shocks gas consumers with big hikes

Published February 14, 2023
— Irfan Khan
— Irfan Khan

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Monday increased natural gas prices in the range of 16 per cent to 112.32pc with retrospective effect from Jan 1 for six months in a bid to raise an additional Rs310 billion from the majority of domestic and all other categories of consumers to secure early disbursement of $1.2 billion tranche.

The ECC meeting chaired by Finance Minister Ishaq Dar also introduced the concept of protected consumers for a period of four months —November to February — whose average per month consumption will be below 0.9 hm3 (90 units). Four slabs for protected and six slabs for non-protected consumers were also introduced.

The minimum slab for residential consumers before the increase was 50 units per month (0.5 hm3), which under the new price mechanism was reduced to 25 units. This means consumers with low consumption would be hit under the new price mechanism to collect maximum revenue from the bulk of domestic users.

A fixed rate of Rs50 per month from protected consumers and Rs500 from non-protected consumers will be collected in addition to the increase in gas prices. The fixed-rate collection, according to the government, is justified to reduce the impact of higher bills due to increased gas consumption in winter.

New tariffs will be effective from Jan 1

Former Prime Minister Shahid Haqqan Abbasi also attended the ECC meeting along with other regular ministers. Commerce Minister Naveed Qamar, Power Minister Khurram Dastgir and Minister of State for Finance and Revenue Dr Aisha Ghous Pasha among others attended the meeting.

The hike in gas tariff for industries, a major source of electricity generation, will push up the cost of production. The industrial sector will then pass on this increase to end-consumers. As a result, inflation will further increase in the months to come.

The government has also increased gas prices for K-Electric, Sindh Noordiabad and Engro Powergen Qadirpur at a rate of 22.5pc to Rs1,050 from Rs1,187 per mmBtu, while an increase of 103.72pc to Rs2,406 from Rs1,181 was made for Liberty Power and 19.65pc to Rs140 from Rs117 per mmBtu was made for Engro Fertiliser Ltd. The gas rate for cement sector was increased by 17.46pc to Rs1,500 from Rs1,023.

On Jan 10, the Oil and Gas Regulatory Authority (Ogra) has already allowed two gas companies — Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL) — to hike their prices by 74.42pc and 75.35pc, respectively. However, it was subject to the approval of the ECC.

BISP

The ECC approved Rs40bn as a technical supplementary grant to Benazir Income Support Programme (BISP) to meet its budgetary requirements for an increase in the unconditional and conditional grants.

Of these, an amount of Rs12bn for Benazir Kafaalat—unconditional cash transfer covering 9 million families while another Rs22bn for disbursement of cash assistance to affectees of floods as emergency relief.

Another Rs3.720bn will be disbursed for Benazir Taleemi Wazaif, Rs1.880bn for the nutritional programme and Rs400m for the direct cost of cash transfer.

Debt rescheduling

The ECC allowed the secretary Economic Affairs Division to sign a debt rescheduling agreement for $14.53 million with Russia -- $11.73m (principal) and $2.80m (interest). This debt relief was announced in April 2020 for IDA-eligible countries to mitigate the socioeconomic impact of Covid-19.

So far, 37 debt suspension agreements with 15 creditor countries have been signed.

Published in Dawn, February 14th, 2023

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