Home South Asia Pakistan Ogra recommends 47% rise in gas prices – fulfilling an IMF demand?

Ogra recommends 47% rise in gas prices – fulfilling an IMF demand?

Due to the depreciation of rupee against the dollar, the gas prices in Punjab and Khyber-Pakhtunkhwa may further increase by 47 percent, while in Sindh and Balochistan by 28 percent from July 1, 2019. In its latest summary, Ogra has requested the government to jack up rates for domestic consumers to keep the gas companies afloat. Previously, PTI had blamed PML-N for a 143percent increase in gas tariff in Sept 2018. Now, the IMF bailout package is considered to be the cause of additional burden on masses.

Ogra

News Desk |

The Oil and Gas Regulatory Authority (OGRA) requested on Friday the government to increase the prices of gas by 47 percent for the fiscal year 2019-2020. Due to the depreciation of rupee against the dollar, the gas prices in Punjab and Khyber-Pakhtunkhwa may further increase by 47 percent, while in Sindh and Balochistan by 28 percent from July 1, 2019.

The regulatory body sent a summary to the government in this regard on Friday – the day when the rupee hit a new all-time low of 149.35 to the greenback in the inter-bank market. The government has already agreed to the International Monetary Fund (IMF)’s demand for increasing prices of gas and electricity for a US$6 billion bailout package.

The advisor had explained that if power tariff was increased under the IMF program, it would not affect consumers utilizing less than 300 units.

In the latest summary, Ogra has requested the government to jack up rates for domestic consumers with effect from July 1 to keep the gas companies afloat.

In two separate determinations forwarded to the government, Dawn reported, Ogra allowed about 47 percent or Rs237 per unit (million British thermal unit) increase in the prescribed price of Sui Northern Gas Pipelines Limited (SNGPL) to Rs738 from Rs501. It said the company’s unaccounted for gas (UFG) losses stood at about 11 percent.

Read more: Government likely to announce the increase in gas prices today

Likewise, it added, the regulator allowed 28 percent or Rs160 per unit increase in the prescribed price of Sui Southern Gas Company Limited (SSGCL) to Rs738 from Rs578. SSGCL’s UFG losses stood at a whopping 16 percent.

PTI blamed PML-N for 143% increase in gas tariff in Sept 2018

In September 2018, it was reported, the Pakistan Tehreek-e-Insaf (PTI) government had approved up to 143 percent increase in natural gas tariff during the ongoing fiscal year having a cumulative financial impact of about Rs116 billion.

The depreciation of rupee against dollar, the gas prices in Punjab and KP may further increase by 47 percent while in Sindh and Balochistan by 28 percent from July 1, 2019.

The previous increase in the gas rates had partly shifted the burden from residential consumers to commercial, industrial, power, fertilizer, cement, and CNG sectors. The then finance minister Asad Umar had presided over the meeting of the Economic Coordination Committee (ECC) of the cabinet which had approved the new rates.

The then minister for petroleum Ghulam Sarwar Khan had blamed the Pakistan Muslim League Nawaz (PML-N) government saying the two gas companies — SSGC and SNGPL — were operating in profit when PML-N assumed power in 2013, but it left behind a deficit of Rs152bn after five years. He had said that it was a difficult decision for the new government in view of higher gas purchase price which could not be sold cheaper.

Read more: Mari Gas discovers oil in Baluchistan, stock prices shoot up

Was it IMF’s demand to Increase Electricity, gas prices?

As the government was finalizing the deal with the IMF, the media had reported that the government had accepted the IMF’s demand for increasing electricity and gas prices in the country. It was reported that the consumers would pay Rs340 billion in two-three years on account of electricity and gas.

The previous increase in the gas rates had partly shifted the burden from residential consumers to commercial, industrial, power, fertilizer, cement and CNG sectors.

In addition, the reports read, the government had also agreed to make the National Electric Power Regulatory Authority (NEPRA) and the Ogra autonomous in setting the prices of electricity and gas. Following the IMF package, electricity and gas have become costlier, prices of petroleum products have hit new highs, the dollar has touched new peaks, and the key interest rate has been rising and rising.

Read more: Petrol prices likely to go up to Rs113.26 per litre

There were reports that the economic bailout package with the IMF was going to cause an additional burden of Rs700 billion on masses in the shape of withdrawal of tax exemptions. However, the Advisor to Prime Minister on Finance, Revenue and Economic Affairs Dr Hafeez Shaikh had assured that the government was focused on not putting too much burden on the common man.

The advisor had explained that if power tariff was increased under the IMF program, it would not affect consumers utilizing less than 300 units, which includes 75pc of electricity consumers. For the same reason, he had said, the government was allocating an additional Rs50 billion for an electricity subsidy in the upcoming budget.

Under the program, he continued, the government was also allocating an additional Rs80 billion for social safety programs like Ehsaas and the Benazir Income Support Program in order to minimize the burden on the common man.

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