PM Shehbaz Sharif's approval to be sought for gas tariff hike

• Gas companies face financial burden due to no increase in gas prices for 3-4 years.
• Energy officials to seek PM Shehbaz's approval. 
• Gas consumers using less gas monthly should be exempted from raise.

ISLAMABAD: The government will hike the tariff for cash-strapped gas utilities of the country if Prime Minister Shehbaz Sharif gives a nod to it, The News reported on Wednesday.

The decision to seek the premier's approval was taken in a meeting under the chairmanship of Finance Minister Ishaq Dar in the federal capital. 

It was also attended by former prime minister Shahid Khaqan Abbasi, State Minister for Finance and Revenue Dr Ayesha Ghous Pasha, State Minister for Petroleum Musadik Malik, Special Assistant to Prime Minister Tariq Bajwa, secretaries of finance, petroleum and other senior officers.

For the last three to four years, there hasn't been an increase in gas prices which has caused Sui Northern and Sui Southern to face a substantial financial burden of Rs600-700 billion.

Sources believe that both gas companies cannot procure gas at Rs1,000 per unit and sell it at Rs589.52 per MMBTU.

“It was decided in the meeting that a special presentation would be made to Prime Minister Shehbaz Sharif seeking his approval to increase gas prices to provide monetary relief to both the gas companies,” one of the participants of the meeting told The News.

The official said various options for increasing the gas prices were discussed and the meeting agreed that those gas consumers using less gas monthly should be exempted from the raise.

And only those who consume maximum gas should be exposed to higher tariffs. However, to this effect, a comprehensive presentation would be prepared based on the proposals figured out in the meeting, for the PM's approval.

Afterwards, the Petroleum Division would take up the issue for Economic Coordination Committee's (ECC) approval and then it would be placed in the federal cabinet for a formal notification.

The International Monetary Fund (IMF) also wants an increase in gas tariffs to avert the financial burden on gas companies and to make the gas sector sustainable.

The Oil and Gas Regulatory Authority (OGRA) had determined an increase in tariff by 40-45% for the year 2022-23 on June 3, 2022, to meet the revenue requirements of both the gas utilities.

According to the amended OGRA ordinance, if the federal government fails to provide recommendations on category- and slab-wise gas prices to the authority within 40 days, the prescribed prices determined by the authority would stand automatically notified and the gas utilities would be bound to charge the new rates.

The regulator had set an average prescribed for SNGPL at Rs854.52 MMBTU, up by Rs265 per unit or 45% higher. Instead of 40 days lapse, four months have passed but gas prices have not increased. 

The government will now have to increase the price to Rs1,000 to cover the backlog of four months. Likewise, OGRA had determined an average prescribed price for SSGCL at Rs699.30 per MMBTU, showing an increase of 40% or Rs308 per unit.