Dramatic hike in electric and gas prices

The federal government accepted to increase gas tariffs by up to 190 percent and electricity prices by Rs1.5 per unit to recuperate further Rs334 billion from consumers, achieving the rest two large conditions of the International Monetary Fund. It is the second time in this financial year that the new government has increased prices of both electricity and gas. The huge burden has been put on the middle and upper middle income groups whose incomes have already declined due to expansion in taxes and stagflation. The government has diminished the average monthly gas bill of the richer class by 64 percent and the richest class by 19 percent by permitting them gains of the last gas tariff slab. In the frame work of the IMF condition, the State Bank of Pakistan also devalued local currency to a record low of Rs161.5 to the US dollar in the inter-bank market The currency depreciated by Rs4.5 in a single day. The ECC also accepted to free from the $3.2 billion oil deal with Saudi Arabia from the range of Public Procurement Regulatory Authority making the way for start of oil and LNG supplies on deferred payments from next financial year. However the body deferred a decision on Rs200 billion fresh borrowings through domestic Sukuk to pay off circular debt, as it observes encashment in cash flows of power sector after expansion in electricity prices. The ECC accepted to increase the electricity and gas tariffs focusing at bringing their cost to recuperate range. The gas consumers will pay further Rs145 billion not including the increase in General Sales Tax collection owing to high prices. By adding the GST impact, gas consumers will be putting up Rs170 billion. The Oil and Gas Regulatory Authority had estimated the revenue requirement for the Sui Northern Gas Pipelines Limited at Rs293.3 billion and for the Sui Southern Gas Company at Rs270.8 billion for the next financial year. Nevertheless at the current rates, the SNGPL was facing Rs87.6 billion deficiencies and SSGCL by Rs56.8 billion paucity. This will be filled after the new increase. Likewise, the electricity consumers will pay additional Rs190 billion, not including the GST increase. After combining the GSP influence, the total extra impact on power consumers will be Rs222 billion. In full, the gas and electricity consumers will pay Rs391 billion in next financial years 2019-20. The ECC accepted to increase the electricity prices by Rs1.494 per unit due to ‘quarterly adjustments’. The National Electric Power Regulatory Authority had approved the increase in prices, which the ECC approved. This will power distribution companies to collect Rs189.6 billion, excluding the GST. In the first year, the government will choose Rs50 billion owing to no increase in prices for consumers of up to 300 units. The government has already decided to withdraw Rs3 per unit industrial support subsidy. It decided to keep the gas prices not changed for consumers using less than 50 cubic meters at Rs121 per million British thermal unit and its monthly bill will also remain unchanged at Rs285.The price for second slab comprising up to 100 cubic meters has been by 190 percent to Rs369 per unit, from Rs127 per unit. The bill of this slab will go up by Rs361 or 63 percent to Rs933 per month from Rs572.The tariff for third slab comprising 200 cubic meters users has been increased by 109 percent to Rs553 per unit from Rs264. This would cause into a monthly bill of Rs3, 872, up by 68 percent from Rs2, 305 per unit. The price for fourth slab of up to 300 cubic meters has been increased by Rs168 percent to Rs738per unit form the current rate of Rs275. The monthly bill of this category will climb by 122.8 percent or Rs4, 406 to Rs7, 995. This category of consumers will counter the record increase in their monthly bills. The gas rate for fifth slab of 400 cubic meters will increase by 42 percent to Rs1, 107 per unit from Rs780. The bill for this category will increase by about 6.4 percent to Rs14, 373 per month from Rs13, 508. The ECC approved to increase the sixth slab price of above 400 cubic meters by just 1 percent and its monthly bill will be lessened by Rs6, 039 or 19 percent due to advantage of the last slab rate. The ECC recommended to keep rates same for large domestic consumers at Rs780 per unit.
There is no need to accelerate gas prices additionally as recent hike is sufficient for gas companies to meet their operational expenditures. Considering Liquefied Natural Gas was being used to encounter the deficiency, there was likelihood that in future, a rate hike in LNG would influence the price device. Imported gas is connected with global price changing so any rise in future LNG prices may influence local gas prices also. The authorities was making sequences for forthcoming winter season so gas supply to industries and domestic consumer would not be discontinued. The government managed in reducing unaccounted for gas losses for industrial sector within Sui Northern Gas Pipelines Limited network to 1.5 percent. In view of gas deficiency it was necessary for Pakistan to increase its gas resources to keep prices in control. In the past five and a half years, not a lonely tender of drilling was launched. As far as new LNG terminals, minimum five global companies were interested in establishing new LNG terminals and the government was looking for four new RLNG terminals out of which three would be in Karachi and one would be in Balochistan. The companies and their local partners will be responsible for the complete supply chain for the new terminals as the government does not desire to get involved in this business. Two RLNG terminals were operating at entire capacity and the government was making arrangements for the coming winter season so gas supply to industries and domestic consumer would not be disrupted.

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