Energy minister says will try to help ease KCCI’s concerns on gas tariff hike

KARACHI: Caretaker Federal Minister for Energy, Power & Petroleum Muhammad Ali, after listening to business community’s concerns over unbearable hike in gas tariffs, assured that he will try his level best in the Cabinet’s meeting to bring down the gas tariffs, being raised to stop circular debt from further appreciation.

Speaking at a meeting of Karachi Chamber of Commerce & Industry (KCCI), the minister informed that the entire gas sector has constantly been suffering grave losses of around Rs400 billion annually since many years, and last year these losses reached Rs461 billion, resulting in accumulating the overall losses of the gas sector to a whopping Rs2100 billion. Hence, raise in gas tariffs has been recommended.

“Work is under way to release the stuck up Rs7 billion payable to industries against previous incremental consumption as committed by Secretary Energy while the Ministry is also working on introducing a winter package for incremental consumption this year,” he added.

Chairman Businessmen Group Zubair Motiwala, Vice Chairman BMG Jawed Bilwani, President KCCI Iftikhar Ahmed Sheikh, Senior Vice President Altaf A Ghaffar, Vice President Tanveer Barry, former Presidents, Managing Committee Members and representatives of seven industrial town associations were also present.

Energy Minister Muhammad Ali further said, “No government wilfully raises prices of any product but we all have to understand the reality and decide accordingly. OGRA’s determination of Rs1350 per MMBtu is purely based on average pricing for whole year which covers losses of natural gas only and it does not include cost of LNG, which is more expensive.”

He said that with ECC’s decision to increase gas tariffs, 60 percent of domestic consumers will bear the burden of Rs400 per month whereas gas tariff for richer segment has been brought at par with LNG prices.

“No change in tariffs for Tandoor operators has been done whereas marginal increase in gas tariffs for commercial users has been recommended as these also include hospitals and educational institutes while a meagre increase in fertiliser sector has also been recommended to keep prices of commodities under control.”

As far as industries are concerned, he said that the government has ensured to keep the industries/ exporters competitive by raising gas tariffs to around US$8 which was close to competing countries as in India, gas tariff stood at US$9 while in Bangladesh it was US$8.25. “The measure has also been taken to reduce the gas tariff difference between the north and south,” he added.

Energy Minister further said that the gas supply situation this year will more or less be the same as it was last year but the SSGC has been advised to come up with some kind of mechanism which ensures smooth supply of gas to all types of industries for five days a week not only in the winter but throughout the year.

“Last year, the general industries remained closed for four months and supply to export-oriented industries was curtailed by 50 percent. We are trying to make sure it does not happen again this year, and all types industries remain operational for five days a week during the winter.”

Speaking on the occasion, Chairman BMG Zubair Motiwala appreciated the decision to raise gas tariff for domestic consumers, which would compel domestic consumers to avoid unwanted usage of gas, resulting in availability of more gas to industries for productive usage.

While urging the government not to accept ECC’s decision to raise gas tariffs for export-oriented and general industries by 86 percent and 117 percent, respectively, he said that OGRA determined a much lesser appreciation in gas tariff, i.e., Rs1350.68 per MMBtu as per revenue requirements but the Ministry has recommended whopping gas tariff of Rs2050 for export-oriented industries and Rs2600 for general industries, which was beyond business community’s understanding. “It gives an impression that the government has decided not to continue support industries; hence, the industrial sector is appropriate in taking a message that continuing/ enhancing the exports perhaps is not the priority of the government.”

He said, “Due to lower supply of gas by SSGC, the capacity utilisation of industries is not more than 70 percent that means 30 percent less production and that means 16 percent exports denied to the tune of US$5 billion from already installed capacity. If cross subsidisation burden is removed from industries, there would certainly be room for reduction in tariffs instead of increase.”

To deal with gas shortages being suffered by the industries in SSGC’s territory, he demanded that a quantum of 211 mmcfd gas erroneously given to SNGPL must be returned to SSGC whereas the rising demand for gas in Balochistan which goes up to 200 mmcfd during the winter season should not be catered by SSGC alone but supplied proportionately by SSGC and SNGPL.

“SSGC takes 110 mmcfd while SNGPL is getting 280 mmcfd from Sui; therefore, SSGC should be burdened with 54 mmcfd and the remaining 146 mmcfd has to be provided by the SNGP during the winter season”, he said, adding that this single step would help the SSGC in easing out supplies to its territory.

Commenting on recent increase in electricity tariffs, he stressed the need to bring down these tariffs so that small & medium-Sized industries could survive, that were an integral part of supply chain for exporters, besides playing a pivotal role in import substitution.

“When we have surplus power, why peak and off-peak tariffs are applied,” he asked, adding that the Secretary Energy committed to supply electricity at Rs20KW/Hr on incremental consumption during the winter and also assured to release the stuck-up Rs7 billion against previous incremental consumption to industries but no progress was taking place in this regard.

President KCCI Iftikhar Ahmed Sheikh stated that the exorbitant hike in gas tariffs for export-oriented and general industries was totally ‘unviable, unacceptable & unfeasible’; therefore, the government must not accept ECC’s decision and consider bringing gas tariffs to a level where these become viable and absorbable so that the wheels of industries in Karachi keep spinning.

Copyright Business Recorder, 2023