Govt drops gas bomb, increases price up to 50%

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Consumers should anticipate a potential 50% hike in natural gas prices in Pakistan when the new fiscal year starts in July, as per local media reports.

The Oil and Gas Regulatory Authority (Ogra) finished making decisions about two troubled state-run gas utilities on Friday and submitted them to the government for issuance of notification.

An estimated revenue need (ERR) of Rs697.4 billion to be collected from petrol customers has been determined by Ogra for the upcoming fiscal year 2023–2024.

A total of Rs358.4 billion would be collected by the Sui Northern Gas Pipeline Limited (SNGPL), which is in charge of supplying gas to customers in Punjab and Khyber-Pakhtunkhwa (KP).

In the meantime, Rs339 billion will be collected by the Sui Southern Gas Company (SSGC), which provides gas to customers in Sindh and Balochistan.

The average suggested price for SNGPL, as assessed by Ogra, is Rs1,238.68/mmBtu, which is a 50% increase over the going rate of Rs415.11.

The average prescribed price for SSGC is also set at Rs1,350.68/mmBtu, an increase of Rs417.23 or 45%.

Ogra explained that the cost of petrol, which makes up over 85% of the decided price, is what makes up the average recommended price.

The agreement between the Government of Pakistan and gas-producing businesses provides the basis for the calculation of this cost, which is a pass-through item.

The government has been informed of the Ogra ruling, and notification is anticipated to take place within 40 days. The SNGPL and the SSGC would be permitted to collect hundreds of billions of rupees from customers once the new system is in place.

The SNGP initially asked for Rs. 1,044.12 billion in income requirements, which included an Rs. 560.38 billion revenue shortfall from the prior year.

Based on this, the SNGPL requested a 286% rise in the prescribed price of Rs2,206.19/mmBtu, to set it at Rs2,977.5/mmBtu.

A mandated price of Rs1,321.47/mmBtu was offered by the SSGC after it requested a 42% increase and sought to collect Rs331.68 billion by asking Rs388.01/mmBtu.

Interestingly, while petrol will cost more for consumers who are zero-rated, it will cost less for CNG stations, cement, fertilizer, power plants, and independent power producers (IPPs). The cost of feedstock gas, however, will more than quadruple in the fertilizer industry.

The current prescribed gas prices for cement, CNG, ice factories, commercial users, fertilizer feedstock gas, power stations, captive power, and IPPs are, respectively, Rs. 1,500/mmBtu, Rs. 1,805/mmBtu, Rs. 1,650/mmBtu, Rs. 510/mmBtu, Rs. 1,050/mmBtu, Rs. 1,200/mmBtu, and Rs. 1,050/mmBtu.

As of right now, the regulator recommends a standard prescribed price of Rs 1,238.68/mmBtu for all of these categories.