Gas tariff hike delayed by four months, causing Rs78 billion loss to the system

The government’s indecision on increasing the natural gas tariff has resulted in a huge loss of Rs78 billion to the gas system, according to senior officials of the Energy Ministry. The Oil and Gas Regulatory Authority (OGRA) had recommended a 45 percent increase for SSGC consumers and a 50 percent increase for SNGPL consumers in June 2023, but the government failed to approve it until October 2023.

Political implications behind the delay

The previous PDM government did not take the decision to increase the gas tariff primarily due to political implications, as it feared losing public support and facing protests from opposition parties. The caretaker government, which took over in September 2023, also wasted time and approved the increase from November 1, 2023 instead of October 1, 2023. This led to the system suffering losses of Rs56 billion from July to September and Rs24 billion in October.

Gas tariff hike delayed by four months, causing Rs78 billion loss to the system
Gas tariff hike delayed by four months, causing Rs78 billion loss to the system

Impact on circular debt and IMF

The delay in hiking the gas tariff has also increased the circular debt in the energy sector, which is now Rs2.9 trillion. The government has increased the tariff in such a way that there will be zero increase in circular debt in FY24, which is one of the benchmarks set by the International Monetary Fund (IMF). The IMF is more concerned about meeting its targets than the losses incurred by the gas system, an official source said.

RLNG prices also increased for October

In addition to the natural gas tariff hike, the government has also announced an increase in the prices of re-gasified liquefied natural gas (RLNG) for both Sui Gas companies. The hike will be up to half a dollar per MMBTU or 3.8 percent for October 2023. The RLNG prices are determined by OGRA based on the import of LNG cargoes by PSO and PLL. The increase in RLNG prices is attributed to the rise in Brent prices in the international market.

Comparison with previous year

When comparing the RLNG prices in October 2023 with those of October 2022, the cost for SNGPL consumers decreased by only 9.8 percent, while SSGC clients experienced an 8.65 percent reduction over the year. The fluctuation in RLNG prices was notable throughout the year. OGRA reduced RLNG prices seven times since January, with two increases recorded in May, September, and now in October.

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