Natural gas prices hiked in Pakistan amid talks with IMF

Pakistan government on Monday approved increasing gas tariffs for various categories by up to 113% in a gesture of compliance with the International Monetary Fund’s strict conditions to unlock stalled funds from a $7 billion bailout package to ward off economic meltdown

New gas tariffs would affect domestic and commercial as well as the CNG sector and the export-oriented industries.

The Economic Coordination Committee (ECC) of the cabinet has given the approval to hike gas tariffs by almost 112% for the highest slab users of domestic consumers, effective January 1, 2023. The price hike is expected to generate revenues of Rs. 310 billion for two large gas utilities, namely Sui Northern Gas Pipelines Ltd. (SNGPL) and Sui Southern Gas Company Ltd. (SSGCL).

Change in consumer slabs

The number of slabs has also been increased to ten. Previously, the minimum slab for residential consumers was 50 units per month (0.5 hm3), but the new pricing system has lowered it to 25 units. As a result, consumers with lower consumption levels will be affected by the new pricing mechanism, which is aimed at collecting maximum revenue from most domestic users.

Protected Category

The ECC also introduced a new category of “protected” consumers with consumption up to 0.25 hm3 to 0.9 hm3. Rates for protected category are lower than the non-protected ones and have been divided into four slabs.

  • For the category with consumption up to 0.5 hm3, the gas price per MMBTU was raised from Rs. 121 to Rs. 150.
  • For users with consumption up to 0.6 hm3, the gas price was decreased from Rs. 300 to Rs. 200 per MMBTU
  • For users up to 0.9 hm3, the price was reduced from Rs300 to Rs250 per MMBTU, effective from January 1, 2023.

The first slab consumers will continue to pay Rs121 per MMBTU.

The Unprotected Category

The non-protected consumers, on the other hand, have been divided into six slabs with the following rates:

  • Gas prices for users up to 1 hm3 have been increased from Rs. 300 to Rs. 400 per MMBTU
  • For users up to 1.5 hm3, the price increased from Rs. 553 to Rs. 600 per MMBTU.
  • The gas price for users in the slab up to 2 hm3 went up from Rs. 553 per MMBTU to Rs. 800 per MMBTU
  • The price for users up to 3 hm3 rose from Rs. 738 to Rs. 1,100,
  • Up to 4 hm3, the gas price increased from Rs. 1,107 to Rs. 2,000.
  • The last slab users with consumption above 4 hm3 saw their gas price increase from Rs. 1,460 to Rs. 3,100 per MMBTU.

For this last category of domestic users, the gas price increased by 112.3%, the highest increase across all slabs.

The protected category will pay a fixed charge of Rs50 (net of meter rent Rs40) and the non-protected category will pay a fixed charge of Rs500 (net of meter rent Rs40).

A further hike in inflation

The increase in gas tariff for industries will raise production costs due to which the added expenses of the industrial sector will be passed on to end-consumers, resulting in an increase in inflation in the upcoming months.

IMF mission

Earlier, the IMF mission left Islamabad without a deal after 10-day talks. The negotiations have now been resumed online for a consensus on a reform agenda under Pakistan’s $6.5bn bailout program signed in 2019. A successful ninth review agreement would release $1.1bn for the country facing an extreme economic crisis.

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