Gas tariff to be increased on IMF demand

Gas prices are expected to surge by over 50% next week due to the International Monetary Fund’s request to the interim government, which appears to have chosen to pass on the losses in the gas sector to the public.

The gas sector reports an annual loss of Rs350 billion, and its total circular debt has reached Rs2.70 trillion.

According to insider information, Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) are set to raise their tariffs by Rs415 per mmbtu and Rs417 per mmbtu, respectively, following this price hike.

The Oil and Gas Regulatory Authority (Ogra) has already given its approval for the gas price hike, with Ogra having sent its final approval to the federal government. Additionally, the import tariffs for liquefied natural gas (LNG) and natural gas will be equalized.

also read: Govt faces IMF delay due to the bill crisis

This increase in gas prices, in accordance with the IMF agreement, will take effect from July 1, 2023. The official notification regarding the rate hike will be issued by the energy ministry.

The IMF recently granted Pakistan permission to extend the payment of electricity bills for consumers using up to 200 units over three months. In return, Pakistan had to announce a 50% increase in gas prices effective from July and take action against electricity theft.

The IMF, based in Washington, conditionally approved the gradual payment of August’s electricity bills over three months for consumers not eligible for subsidies and using up to 200 monthly units. Lifeline consumers and those in this consumption category, protected from price hikes, will not qualify for this temporary relief. This means only about four million consumers, approximately 10% of the total, will be eligible for this assistance. The government initially sought permission to allow staggered payments of bills for consumers using up to 400 monthly units, which would have benefited 32 million consumers, or 81% of the total, but the IMF rejected this request.

Sources indicate that the IMF has also called for the adoption of the weighted average cost to fully recover imported gas prices from consumers. This involves determining the gas price by taking into account both imported LNG and local gas rates, then calculating an average gas rate and setting consumer-specific prices accordingly.

Pakistan has already launched a crackdown on electricity theft to reduce technical and commercial losses incurred by power distribution companies. Interim Energy Minister Mohammad Ali emphasized the importance of tackling theft and unpaid bills, citing an annual loss of Rs589 billion due to these issues.

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