IMPLEMENTATION of a new Ogra recommendation to increase the gas prices by an average 8.7pc or Rs142.45 per mmBtu in Punjab and KP, and 25.78pc or Rs361 per mmBtu in Balochistan and Sindh would help the government meet yet another IMF condition. The new rates will become effective from February just before the Fund sends its mission for the first review of its $7bn programme, the success of which would lead to the release of the second tranche. The Ogra-prescribed gas price raise for Sindh and Balochistan is far below the jump of over 200pc demanded by SSGC. The new increase also brings the average sale price of the two companies almost at par. It is now for the government to decide how it plans to distribute the additional burden of Rs847.33bn on different categories of gas consumers.

The Ogra-prescribed hike in gas rates should help the two utilities recover the full cost to address the growing gas sector circular debt. But periodic price increases cannot tackle the sector’s multiple challenges, which are as complex as the ones being faced by the power sector. The deep financial crunch and the IMF requirement of doing away with large energy subsidies is making matters worse for policymakers. For example, the IMF condition to cut off gas supply to captive power plants in order to boost electricity usage as part of the power sector reforms from next month will create surplus fuel in the system and deprive the utilities of high-paying users who are cross-subsidising residential gas consumers. That will lead to further increases in rates going forward. Besides, the government is already facing the glut of contractual RLNG cargoes due to falling power sector and other industry demand. The price increase can help only so much. The policymakers need to look much deeper to tackle gas issues such as price distortions and theft to keep the crisis from spiralling.

Published in Dawn, December 19th, 2024