ISLAMABAD: The government has increased up to 124 percent in the gas prices for domestic consumers from January 1, 2023, to generate a revenue of Rs310 billion from the consumers in the next six months (January-June 2023) to curtail the circular debt in the gas sector.
A day after staff level 10-day discussion on the 9th review with the International Monetary Fund (IMF) team, Finance Minister Ishaq Dar told the media during the press conference that the government is required to reduce the gas sector circular debt to zero as per one of the prior actions for completion of the review.
On Monday, the Economic Coordination Committee (ECC) of the Cabinet meeting presided over by the finance minister gave approval for an increase in the gas sale prices for various slabs and categories. Up to 1 hm3 slab consumers gas price has been increased from Rs300 MMBTU to Rs350 followed by up to 2 hm3 slab consumers from Rs553 to Rs730, up to 3 hm3 slab consumers Rs738 to Rs1,250, and for up to 4 hm3 slab consumers from Rs1,107 to Rs2,250, and above 4 hm3 slab consumers gas sale price has been increased from Rs1,460 to Rs3,270.
The prices would be effective from 1st January 2023.
Gas price for the bulk category was increased from Rs780 per MMBTU to Rs1,600 per MMBTU, commercial Rs1,283 to Rs1,630, Power (KE, SNPC, EPQL) from Rs857 to Rs1,050, Liberty from Rs1,181 to Rs2,406, fertilizer feed Engro Rs117 to Rs140 per, feed (FFBQL) from Rs302 to Rs510, fuel Rs1,023 to Rs1,500, cement Rs1,277 to Rs1,500, export industries process Rs819 to Rs1,100, captive Rs852 to Rs1,100, non-export industries process from Rs1,054 to Rs1,200, captive Rs1,086 to Rs1,200, and for CNG sector from Rs1,371 to Rs1,805 MMBTU. The gas sale price increase would become effective from 1st January 2023.
Gas sector: Dar for early settlement of circular debt
The ECC was informed that ERR was issued by Ogra for the fiscal year 2022-2023 on 3rd June 2022 for both gas companies. As per determination, SNGPL required a revenue of Rs261 billion and SSGL Rs285 billion in the fiscal year 2022-2023 but the Ogra did not allow previous year’s revenue shortfall.
Meanwhile, both the gas companies filed petitions to the OGRA for review of ERR and OGRA vide its decision dated 09.01.2023 determined the RERR of both the Sui companies for the fiscal year 2023 based on the RERR, the cumulative revenue requirement for both the Sui companies has been determined by OGRA at Rs610 billion – Rs288 billion for the SNGPL and Rs322 billion for the SSGC.
Based on the advice of the federal government, the OGRA notifies tariffs for various categories and slabs of consumers. The category-wise consumer gas sale prices/ tariff for natural gas reflects the socioeconomic agenda of the federal government especially, the supply of cheap fuel to households. The OGRA Ordinance also requires the federal government to ensure that the sale prices so advised are not less than the revenue requirement determined by the authority.
However, the consumer gas prices have not been adequately revised consistent with the OGRA’s determination since the fiscal year 2013-14. This has resulted in the accumulation of revenue shortfall, tariff differential amounting to Rs577 billion (SSGCL Rs245 billion, SNGPL Rs332 billion) as of June 2022.
Current consumer gas prices have been effective since September 2020. If the current consumer gas prices are kept unchanged for the rest of the six-month period i.e., January to June 2023, the Sui companies, would face a combined revenue shortfall of Rs229 billion during the fiscal year 2022-23 which will further increase the circular debt.
The ECC was informed that multiple consultative meetings were held in the Finance Division on the revision of the domestic sector gas tariff. During the discussions held in those meetings, it was proposed that instead of full financial year cost recovery, the tariff proposal has to address apportioned RERR for six months, i.e., January to June 2023. It was further suggested to simplify the proposal by retaining the existing six slab structure in the domestic sector.
There shall be a shortfall of Rs110 billion for July to December 2022 in case only six months RERR are considered. This will become a part of circular debt stock and recovery of the same will be considered later.
The ECC was requested that the gas price revisions as proposed may be approved which would generate a revenue of Rs310 billion as against apportioned RERR for six-month January to June 2023 of Rs305 billion; the proposed price increase for power consumers would also be applicable to the power consumers of Mari Petroleum Company Ltd and Pakistan Petroleum Ltd.
The Ministry of Economic Affairs presented a summary with regard to G-20 Debt Service Suspension Initiative (DSSI). This debt relief was announced in April 2020 for the IDA eligible countries to mitigate the socioeconomic impact of Covid-19.
Under this initiative debt relief was extended through the suspension of principle and interest payments. So far, 37 debt rescheduling agreements with 15 creditor countries have been signed. Foregoing in view, the ECC allowed the Ministry of Economic Affairs for signing of debt rescheduling agreement with Russia for debt suspension of Covid-related amount US$ 14.53 million. The Ministry of Poverty Alleviation and Social Safety presented a summary for an enhancement of the BSIP budget.
The ECC after discussion granted Rs40 billion as a technical supplementary grant to BISP to meet its budgetary requirements for an increase in the unconditional and conditional grants.
Copyright Business Recorder, 2023