Gas consumers in Pakistan are bracing for a harsh winter, after the Caretaker Federal Minister for Energy Muhammad Ali revealed that gas load-shedding will extend to a staggering 16 hours daily due to shrinking gas reserves and surging prices.
The government aims to address the ballooning circular debt in the sector, which currently stands at a staggering Rs2,100 billion, said Ali.
During a media briefing, Caretaker Minister Muhammad Ali shared alarming statistics, stating that the total circular debt for the entire energy sector has reached Rs4,500 billion, excluding interest payments, with Rs2,300 billion attributed to the electricity sector alone.
“There will not be a resurgence of the circular debt in the gas sector after the recent increase in gas prices,” Mr. Ali assured, aligning with the government’s commitment to the International Monetary Fund to curb further circular debt in the power sector.
Regarding the gas price hike, the minister pointed out that there was no change in prices during the first half of the previous fiscal year, but prices did rise in the second half. However, this increase did not cover the required supply of re-gasified liquefied natural gas (RLNG) diverted to domestic consumers during the winter season.
Transition to LNG/LPG
Minister Ali suggested consumers shift to LPG and announced a limited piped gas supply in the mornings, afternoons, and evenings. The ban on new gas connections continues due to insufficient surplus gas.
To address the upcoming winter gas crisis, the government arranged two LNG cargoes for December and plans two more for January. Gas prices remained unchanged for 2.5 years, leading to a Rs461 billion circular debt in the previous fiscal year.
Financial risks forced exploration and production companies to leave, and federal fiscal constraints hampered exploration and imports. Only 30% of households have piped gas, while most rely on LPG or biomass, especially in rural areas.
About 57% of domestic gas connections are protected with fixed prices, using 31% of total gas. The minister emphasized the need to rationalize prices for this category, capping the maximum bill at Rs1,300 per month. Tandoor gas rates remained unchanged due to their essential nature. Lastly, the minister addressed the industry tariff imbalance between Punjab and Sindh, seeking to equalize industry rates across the north and south regions.
Massive increase in gas prices
Earlier this week, Pakistan’s caretaker government approved a massive increase in gas tariffs to satisfy IMF conditions ahead of a $3 billion bailout facility review.
The Economic Coordination Committee of the federal cabinet, chaired by Caretaker Finance Minister Dr. Shamshad Akhtar, approved the tariff hike on October 23, impacting millions of people across Pakistan.
The proposed changes in gas tariffs include the following:
- a 173% increase for non-protected domestic consumers
- 136% for commercial consumers
- 86% for the export industry
- 117% for the non-export industry
- 14% for fertilizer
- 144% for CNG.
The move is estimated to generate Rs57 billion in revenue, with Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline (SNGPL) requiring Rs697 billion and anticipating an annual revenue of Rs755 billion with the tariff hike.
Business community calls the price increase detrimental
The business community, including industrialists, has strongly opposed the recent unprecedented surge in natural gas prices, deeming it harmful to the economy and industrialization and asked the government to immediately reverse the decision in the best interest of the economy.
Ayub Zakori, President of the Industrialists Association Peshawar (IAP), expressed concerns that the gas price increase will escalate business costs, industrial production expenses, and inflation, impacting people from all walks of life. He warned that failure to rescind this significant rate hike would lead to industry closures and substantial unemployment.
Calling the gas price hike an additional burden amid existing challenges, such as the pandemic and unfriendly government policies, the business community threatened to stage protests unless the government reverts the recent exorbitant gas price increase.