Hot takes are plenty on the recent gas price revision. Some want more. Others see it as a measure that arrests the circular debt flow at least for 2HFY23. Truth be told, the weighted average impact is no more or no less than what the regulator had determined last month. Some are worried about sharp currency adjustments in the last month, which may not necessarily be part of Ogra’s determination. That is correct. But it gets taken care of in the next review. The process itself takes care of most things, it is the inability to carry the process every six months that piles up the issues.
Details are awaited on the revised tariffs, but from what is making rounds on media – the three big changes, apart from of course the base tariff revision itself, are apparent removal of previous slab benefit, introduction of fixed charges, and removal of minimum charges. Clarity is awaited on these fronts, but whatever little is out there, tells that domestic consumers no more enjoy the previous slab benefit, which was introduced as block tariff scheme in 2019.
This clearly has a much bigger implication than simply comparing tariff change in two comparable slabs. Mind you, the slab benefit in case of natural gas existed on all six slabs. There was also a minimum charge of Rs173/mmbtu. If it has been withdrawn, gas bills up to 13 units of monthly consumption will be lower from previous rates. All other consumption points will cost higher in the new tariff cycle –with the increase crossing 100 percent for all consumption beyond 90 units a month. The actual inflation consideration as a result will be significantly higher than what is being thrown out there.
The proposed tariff has Rs500 in lieu of “fixed charges” per month for all consumers in the non-protected category, and Rs50 for protected. If it is what it sounds like, that adds around 35-40 billion on that front from domestic consumers only – with the bulk coming from SNGPL. The GST increase from 17 to 18 percent is the icing on the cake.
As the slabs have been increased, the PBS will once again find it difficult to calculate the exact impact. Even if it had adequate granular information, it was not expected of them to accurately assess the price change. That is largely because the Bureau does not account for previous slab benefit in its tariff calculation for CPI purposes. Watch this space for detailed inflation impact according to income quintiles – which is likely to be as high as twice the PBS’ calculations in some cases.
In the broader picture, passing on the price and achieving parity in a fast-depleting natural resource fuel that is used only by one-fourth of the country, that too in urban centers – should never have been this difficult. The priorities remain skewed even today. Pricing alone will not fix it. It will not even completely arrest the flow of circular debt, let alone resolve it.
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