Take note, home consumers and industrialists—these are your new gas prices
Take note, home consumers and industrialists—these are your new gas prices:With effect from November 1, 2023, the caretaker government of Pakistan has approved a rise in the cost of natural gas for certain consumer categories. The Petroleum Division’s summary, which was based on the recommendation of the Oil and Gas Regulatory Authority (OGRA), was reexamined by the Federal Cabinet and the Economic Coordination Committee (ECC) prior to the decision being made.
According to the government, the rise in gas prices is required to encourage the economical and sustainable use of this limited resource, maintain the affordability and sustainability of the supply chain, and prevent further debt buildup in the cyclical economy. The depletion of natural gas reserves, depreciation of the rupee, inflation, and the importation of liquefied natural gas (LNG) were also mentioned by the government as contributing factors to the rise in gas prices.
As part of the standby arrangement, the International Monetary Fund has placed a strong emphasis on resolving the shortfall in the circular flow within the gas sector.
On June 2, 2023, OGRA really released its Estimated Revenue Requirements (ERR) for Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) for the fiscal year 2023–2024. This calculation showed that the required income for SNGPL and SSGC were Rs 358 billion and Rs 339 billion, respectively.
As required by Section 8(3) of the OGRA Ordinance 2002, the federal government had to give OGRA instructions to modify consumer gas prices in conformity with government policy. This modification was to be put into effect within 40 days of OGRA’s decision, with effect from July 1, 2022. Unfortunately, no action has been taken on this revision to consumer gas pricing thus far. Due to the delay in price adjustment, the income loss for the July–September 2023 period has already been borne by the Sui firms. This circumstance emphasizes how vital it is to address the financial imbalance.
“The new pricing varies wildly throughout different non-protected slabs. Penalizing only large domestic customers is ineffective and only addresses the symptom of the problem, according to Afia Malik, Senior Research Economist at PIDE.
“There is actual circular debt in the gas industry. It is evident that deregulatory action in the natural gas industry is necessary to solve this urgent problem. on maintain financial viability, tariffs must change on a cost-of-service basis and cross-subsidies and subsidies must be relegated to the past. Cross-sector cross-subsidization has done nothing but promote wasteful use. According to Malik, “pumping natural gas is a luxury that ought to be stopped right away.
Domestic (Residential) Consumers Price to new
The government asserted that by maintaining low or stable pricing, it has safeguarded low-income individuals and companies. For instance, 57% of domestic consumers who fall into the protected category do not see a rise in gas prices. A set monthly fee of Rs. 400 has also been instituted by the government for use up to 0.25 hm3. Additionally, the cost of selling gas supply to roti tandoors is still the same.
For domestic users, the previous and new pricing are displayed in the following table:
|Slabs||Old Rates (Rs./mmbtu)||New Rates (Rs./mmbtu)||Fixed monthly charge (Rs.)|
|Up to 0.25 hm3||200||300||1000|
|Up to 0.6 hm3||300||600||1000|
|Up to 1 hm3||400||1,000||1,000|
|Up to 1.5 hm3||600||1,200||1,000|
|Up to 2 hm3||800||1,600||2,000|
|Up to 3 hm3||1,100||3,000||2,000|
|Up to 4 hm3||2,000||3,500||2,000|
|Above 4 hm3||3,100||4,000||2,000|
According to the government, in order to provide an even playing field for everybody, the gas rates in the North and South have been rationalized. Through stakeholder consultation, it has also created a Regionally Competitive Energy Tariff (RCET) for export businesses. The government stated that its goals are to promote gas conservation in industries where gas use is inefficient or if alternative fuels are available, as well as to discourage captive usage by export and non-export customers.
The previous and current pricing for various categories are displayed in the table below:
|Category||Old Rates (Rs./mmbtu)||New Rates (Rs./mmbtu)|
|Sp. Commercial (Roti Tandoor)||697||Unchanged|
|Power (KE, SNPC, EPQL)||–||1,050|
|Fertilizer Feed (Engro)||$ 0.7/mmbtu||200|
|Fertilizer Feed (FFBQL)||510||580|
|Export Ind. Process||1,100||2,100|
|Export Ind. Captive||1,100||2,400|
|Non-Export Ind. Process||1,200||2,200|
|Non-Export Ind. Captive||1,200||2,500|
The cascading consequences
An increase in gas prices strengthens the cash flows of gas utilities and companies engaged in oil and gas exploration. On the other hand, it hurts companies that depend on gas-captive power plants, according to Arif Habib Vice President of Research Rao Aamir Ali. Ali goes on, “In terms of its impact on inflation, it directly contributes to an effect of about 80 basis points.”
What is fixed charges in Sui gas bill?
Regardless of the quantity of gas used, Sui Gas firms frequently charge their customers for both the actual gas consumed (variable rates) and a fixed charge that covers various administrative and operational costs.
What is the difference between LPG and Sui gas?
Cooking times are shortened by the higher calorific value of an LPG flame compared to alternative fuels, such as Sui Gas.