Government notifies gas price increase by up to 197.8%

ISLAMABAD: The government notified rise in gas price for domestic consumers by 16-197.8 percent with one slab benefit and 31 percent increase for industrial, commercial, power and CNG sectors.

The new prices will be effective from July 1, 2019. In domestic sector, the consumers of first and sixth slab category will face no increase in gas price.

The electricity tariff will increase by Rs1.50 per unit and will also be effective from July 01.

PTI government under IMF commitment is to enforce new increase in gas and electricity tariffs from July 1 and will report it to the IMF executive board meeting on July 3, 2019.

For fertilizer, the gas prices have soared by 62 percent of the cost of delivered gas to Rs300 per unit from Rs185 per MMBTU. The increase in gas prices for all categories of consumers is linked with the cost of delivered gas in percentage terms. The cost of delivered gas stands at Rs738 per MMBTU.

In domestic sector, the first slab consumers (up to 0.5 Hm3) will face no increase in gas tariff and they will continue to pay Rs121 per MMBTU for the gas usage.

As much as Rs121 is the 16 percent of the cost of delivered gas. However, second slab consumers consuming gas up to 1Hm3 will face the increase in tariff by 41 percent and their new tariff will be 300 per MMBTU instead of existing Rs127 per MMBTU.

Likewise, the third slab consumers consuming up to 2 Hm3 will face the increase in tariff by 75 percent and they will pay Rs553 per MMBTU instead of existing Rs254 per MMBTU. The fourth slab category consumers using gas up to 3Hm3 will experience the increase in cost of gas by 100 percent of the cost of delivered gas.

They will pay the new cost of Rs738 per MMBTU instead of prevalent price of Rs275. The fifth slab domestic consumers using gas up to 4 Hm3 will face the rise in tariff by 150 percent to Rs1107 per MMBTU from Rs780 per MMBTU.

However, the sixth slab category using above 4 Hm3 gas per month will have to pay Rs1460 per MMBTU which is 197.8 percent of the delivered gas.

The tariff for domestic bulk consumers will remain unchanged at Rs780 per MMBTU.

The export industry of textile, leather, carpet, surgical and sports will be given the gas at the rate of $6.5 per MMBTU and this export industry will face no increase in gas tariff.

The tariff for captive gas use in this category will be charged as per captive category meaning by that at Rs1021 per MMBTU. The monthly bill for special commercial consumers (roti tandoor) with consumption up to 3Hm3 will be in accordance with the domestic slab. For fertilizer fuel, the tariff has been increased by 31 percent of the cost of delivered gas to Rs1,021 per MMBTU.

For powerhouses, the new gas price stands at 824 percent whereas the existing prices stand at Rs629 per MMBTU. For cement the gas tariff is increased to Rs1,277 from Rs975 per MMBTU, and for captive and general industry the new gas tariff stands at Rs1,021 per MMBTU and for the CNG sector the new cost now stands at Rs1,283 per MMBTU and for commercial consumers the gas tariff also stands at Rs1,283 per MMBTU.

However, the government press release says Ogra has determined the total revenue requirements for FY2019-20 as Rs541 billion (which includes Rs54 billion on account prior years’ circular debt). Based thereon, Ogra has determined the average cost of supply of indigenous gas at Rs738 per MMBTU.

The present tariff can generate a total revenue of Rs397 billion during the year resulting in a revenue shortfall of Rs144 billion. Therefore, revision in gas sale prices are inevitable. Even with the proposed increases, 95 percent of the domestic consumers are being subsidised for a total of Rs104 billion.

It says 45 percent of the domestic consumers who are currently paying only Rs121 per MMBTU will not face any price increase and their tariff is fixed at only 16 percent of the cost of supply.

This is necessary for the long-term sustainability of gas sector. The high-end domestic consumers who consumed 4hm3 or more faced a price increase of up to 143 percent in September while other consumers only had a price increase ranging from 5 percent to 25 percent.

The slab structure has been revised to provide one previous benefit to the domestic consumers. The 95 percent of the domestic consumers are being cross subsidised by the high-end domestic consumers and other sectors. Major reason of the high bills during winter is inefficient and continuous use of gas in geysers for water heating and heaters for space heating.

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