The government is all set to increase effective gas prices for non-protected domestic consumers by up to 129 percent, bulk 25 percent, commercial 136 per cent, export industry 71 percent, non-export industry 117 percent, CNG 144 percent, cement 193 percent and Liberty Power 62 percent, sources close to Secretary Petroleum told Business Recorder.
To be applicable from October 1, 2023, there will be no change in gas prices for protective category of domestic consumers, Roti Tandoor and feed gas of Engro’s fertiliser plant.
However, fixed rate for those protected consumers has been increased from Rs 10 to 400(3900 per cent), non-protected domestic consumers using up to 600 MMBTU to Rs 1000 from Rs460 (117 per cent) and up to 3100 MMBTU to Rs 2000 from Rs 460(335 per cent).
Gas tariff and reforms
OGRA determines annual revenue requirements of both Sui companies in accordance with the respective licence conditions, Natural Gas Tariff Rules 2002 and Section 8 of the OGRA Ordinance 2002.
OGRA issued its determination of Estimated Revenue Requirements (ERR) for FY 2023-24 on June 02, 2023 for both SNGPL and SSGC. According to the determination, SNGPL required revenue of Rs.358 billion and SSGCL required revenue of Rs.339 billion in FY 2023-24.
Pursuant to Section 8(3) of the OGRA Ordinance 2002, the federal government was required to advise OGRA to revise the consumer gas prices in accordance with the government policy with effect from July 1, 2022 within 40 days of determination of OGRA. However, the revision in consumer gas prices could not be done as of date.
Due to price inaction, the Sui Companies have already carried the revenue shortfall for the period July to September 2023. Section 8(3) of OGRA Ordinance requires the federal government to ensure that the sale prices so advised are not less than the revenue requirement(s) determined by the Authority. However, the consumer gas prices have not been adequately revised consistent with OGRA’s determination since FY 2013-14. This has resulted in accumulation of revenue shortfall/ tariff differential amounting to Rs. 878 billion, i.e., SSGCL Rs. 450 billion and SNGPL Rs 332 billion as of June 2023.
This is part of petroleum sector’s total circular debt stock (excluding late payment surcharge of approximately Rs. 2,100 billion). Price inaction until June 2024 will lead to revenue shortfall of Rs. 185 billion on natural gas only. Companies have already carried a revenue shortfall of Rs. 46 billion for the period July to September, 2023. On the other hand, the deficit on RLNG diversion of Rs. 210 billion is anticipated during this winter, bringing the total shortfall to Rs.395 billion.
The sources said natural gas reserves of the country are depleting at a CAGR of 5-7%. Petroleum Division has devised a tariff proposal for all consumer categories and intends to generate surplus revenues over the revenue requirements of Sui Companies to maximize coverage of anticipated diversion of RLNG to domestic consumers during winter months in the absence of any budgeted subsidy and industry tariff rationalisation, thus stopping the flow of circular debt.
Domestic (Residential): The gas sector has no budgeted subsidies, and affordability for certain consumer categories is to be ensured through cross subsidy funded by surplus revenues created in other consumer categories. The average prescribed price of each molecule is Rs. 1,291/mmbtu but the protected category of domestic consumers is still paying a tariff of Rs.121/ mmbtu to Rs.250/mmbtu in 4 consumption stabs. There will be no increase in tariff for the protected category (57% of the domestic consumers); however, the fixed monthly charge is proposed to be increased from Rs.10 to Rs.400 for this category. The tariff for non-protected domestic consumers will have marginal increase in initial slabs with progressivity in tariffs for onward stabs until the highest consumptions where tariff will be aligned with that of LPG cost. This is in order to curb unbridled consumption while urging those who can afford to switch to alternate fuels to conserve gas. The previous slab benefits are being maintained up to consumption of 4 hm3. There shall be no previous slab benefit in the last slab of non-protected domestic category. The non-protected category fixed charge is proposed to be increased in 2 slabs; fixed monthly charge for consumption up to 1.5 hm3 will be Rs. 1,000 while Rs. 2,000 for exceeding consumption of 1.5 hm3 (currently Rs.460 per month for both proposed stabs).
