The government has increased gas prices by 31 percent and that of Compressed Natural Gas (CNG) by Rs 13 per kg. The new rates will be effective from July 1. The Oil and Gas Regulatory Authority notified the new rates on Monday.
Petroleum and Foreign Minister Shah Mahmood Qureshi announcing the increase in gas and CNG rates at a press conference said fertiliser industry and first three slabs of the domestic consumers have been exempted from the increase in gas and CNG rates. The increase will raise the energy bill by Rs 140 for a car having 11.6-kg cylinder.
Qureshi told mediamen that the increase was inevitable to cover the granted profit to Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC). As per the law, SNGPL and SSGC have sovereign guarantees for getting 17.5 and 17 percent returns, respectively per annum on investment. He said the granted return counts for Rs 61 billion every year.
He told a questioner that Shaukat Aziz government allowed only 5 percent increase to gas distribution companies last year against their granted profit/margin and it accumulated due increase for the current fiscal year. He was of the view that more local gas production was the only way out for giving some relief to consumers.
The minister said that the government is going to change oil and gas pricing formula for ensuring a reasonable profit/margin to equally protect all the stakeholders of petroleum sector.
Qureshi said that the increase in oil and gas prices could only guarantee investment in this sector and subsequently help Pakistan get additional production to plug the demand and supply gap.
The minister conceded that Saudi Arabia did not accept Pakistan's request for supply of oil against deferred payments for two years. However, he was optimistic that Saudi Arabia will work out some other options for helping Pakistan support its fragile economy.
The minister disclosed that the government will make upfront Rs 286 billion payment to Oil Marketing Companies to clear their piled up price differential claims (PDCs). Gas rates will go up by 68 percent for textile industry. It will have devastating effect on ailing industry.