Domestic consumers spared: Gas made costlier for captive power plants

ISLAMABAD: The Economic Coordination Committee (ECC) has rejected a proposal by the Petroleum Division to increase the indigenous gas tariff for non-protected domestic consumers by Rs100 per mmbtu. However, the ECC has approved a gas tariff increase from Rs3,000 to Rs3,500 per mmbtu for captive power plants, effective from February 1, 2025.

The Petroleum Division proposed revision in the domestic consumers’ categories (non-protected). With the proposed tariff revisions, both gas companies are anticipated to have estimated revenue surplus of Rs18 billion by end June 2025, assuming the captive power plants continue to operate.

Under Oil and Gas Regulatory Authority (Ogra) Ordinance 2002, the federal government is required to advise Ogra revision in the category-wise consumer gas prices within 40 days of the determination by or before January 26, 2025, so that revised tariff becomes effective from February 2025. “Further the amended Section 8 (3) of Ogra Ordinance 2002 (amended through enactment in March 2022) mandates federal government to ensure that the consumer gas sale prices so advised are not less than the revenue requirements determined by the Ogra.

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The Ogra on December 17 2024 issued determination of revised estimated revenue requirements (RERR) for fiscal year 2024-25 for both the SNGPL and the SSGC. According to the said determinations, the SNGPL requires a revenue of Rs578 billion and SSGC requires a revenue of Rs369 billion to sell through the remaining part of fiscal year 2024-25. The cumulative revenue requirements of both gas companies are Rs947 billion for fiscal year for the fiscal year 2024-25. The Ogra in its determination of RERR fiscal year 2024-25 while taking into account the previous years’ revenue shortfalls of both gas companies owing to no or inadequate gas price revisions made by the government (gas circular debt) has allowed cumulative of Rs99 billion as adjustment to both the gas companies. The projected gas sale revenues have been assumed on the premise that captive power plants will continue to operate till June 2025. In case captive power plants are shut down by January 31, 2025 as per the IMF’s structural benchmark under stand by agreement (SBA) even then because of adjustment available to both gas companies, they may remain net positive in revenues.

Besides phasing out of captive power plants from gas network, it has been agreed with the Fund that existing tariff of captive power plants will gradually be brought to RLNG equivalent in rupee term.

Although, natural gas pricing is done biannually, while RLNG pricing is done on monthly basis, accordingly, an average of last six months (July-December 2024) notified RLNG tariff in rupee equivalent; i.e., Rs3,500 per mmbtu is approved.

The ECC meeting was chaired by Federal Minister for Finance Senator Muhammad Aurangzeb with Federal Minister for Petroleum Musadik Masood Malik, Minister for Power Sardar Awais Ahmed Khan Leghari, Minister of State for Finance and Revenue Ali Parvez Malik, chairman Ogra, chairman SECP, federal secretaries and senior officers from the relevant divisions in attendance. In a statement, it said that the ECC following a thorough discussion decided to approve upward revision in gas tariff for captive power plants from Rs3,000 per mmbtu to Rs3,500 per mmbtu to ensure required revenue for the gas sector during FY 2024-25, but it did not agree to increase the tariff for domestic consumers with a view to protecting the domestic consumers from additional burden. The ECC, however, instructed the Petroleum Division to take necessary measures for the imposition of a grid transition levy on the captive power plants to enhance the energy sector efficiency.

Copyright Business Recorder, 2025