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Massive hike in gas tariff from January 1

December 29, 2011

- File Photo

ISLAMABAD: Amid an acute shortage of natural gas across the country, triggering public protests in various areas, the government decided on Wednesday to massively increase gas tariff for all categories of consumers.

The increase will vary between 14 per cent and a whopping 207 per cent.

Petroleum Minister Dr Asim Hussain told this correspondent that the increase would come into effect on January 1.

Dr Hussain said the only thing he was currently discussing with the ministry of finance was the amount of gas development levy on compressed natural gas because the government wanted the CNG price at about 55-56 per cent of the oil parity price.

The finance ministry and the petroleum ministry differ on whether the CNG price increase be calculated at the existing or the enhanced petrol price after December 31.

Nevertheless, the CNG price would be increased from about Rs66 per kg to Rs79 per kg, an increase of Rs13 per kg that depending on the regional price would go up by 28 per cent and 39 per cent, Dr Hussain said.

An official said the CNG rates would go up by 38.63 per cent in zone-1 (Khyber Pakhtunkhwa, Potohar and Balochistan) and by 27.79 per cent in zone-II (Sindh and Punjab).

The minister said the gas rates for domestic and commercial consumers had been increased by 13.98 per cent across the board without any exemption for any consumer slab or category.

All other consumers would also be charged gas development levy to raise funds for implementation of major gas pipeline projects, in addition to the normal 13.98 per cent increase recommended by the Oil and Gas Regulatory Authority (Ogra), he said.

As such, the natural gas rates would increase by 16.97 per cent while rates for Wapda’s power companies and the Karachi Electric Supply Company have been jacked up by 13.58 per cent. The gas tariff for independent power producers (IPPS) have been increased by 34.57 per cent.

The minister also confirmed that gas tariff for fertiliser sector had been increased by 207 per cent.

An official said the petroleum minister overruled a proposal to exempt from tariff increase the first three slabs of domestic consumers, generally described as lifeline consumers, and another recommendation to put on hold or stagger the imposition of gas development levy on industrial, fertiliser, cement and power sector consumers for pipeline projects.

The official said tariff increase approved by the petroleum minister in consultation with the finance ministry would not be sent to the prime minister for clearance because the PM and his cabinet had already authorised the petroleum ministry to rationalise gas tariff and had in fact discouraged the ministry from sending such proposals to the prime minister.

The tariff increase has come when the overall inflation is still in double digits and about 1-5 per cent increase in petroleum prices would take place later this week because of a lag effect of higher international oil prices.

Last month, Ogra had recommended a 14 per cent increase in natural gas rates for all consumers to generate an additional revenue of about Rs30 billion for the Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL). For the first time, Ogra had also forwarded an executive summary to the federal government informing it about the factors leading to unreasonable tariff increases.

Ogra asked the government to review these factors and take policy measures to control tariff increases.

It said the foremost factor resulting in tariff increases related to gas shortfalls and resultant load management under which the government diverts gas from high-tariff consumers (like industries, CNG, power sector and commercial consumers) to low-tariff consumer classes like domestic and fertiliser sectors.

The government stops supplying gas to consumers paying Rs500 per unit in the industrial sector and diverts it to domestic consumers paying about Rs150 per unit, it said.

Secondly, the gas utilities had to incur 70 per cent cost of development schemes recommended by the parliamentarians on the instructions of the prime minister.

This not only keeps on adding low-priced consumers and thus higher gas requirements but puts additional financial burden on gas utilities.

Third, the gas transmission losses – technically known as unaccounted for gas – also have been on the rise although Ogra could not allow more than 7 per cent losses owing to a court stay order.

One per cent gas loss, Ogra pointed out, translated into Rs1.5 billion that meant about Rs10-15 billion worth of system losses. Since the actual losses were to the extent of 13 per cent, the total system losses translated into more than Rs20 billion.

Fourth, the cost of operations as a result of parliamentarians’ scheme was also costing the gas utilities about Rs15 billion per annum. T

he government has been advised to look into these factors and take policy decisions to control such additional financial burden.