In Islamabad, the interim government is actively developing a strategy tointroduce a specialized gas tariff aimed at supporting the low-incomepopulation in Balochistan. This initiative aims to mitigate the potentialimpact of an impending tariff increase. Sources disclosed this informationto The Express Tribune on Monday.
According to these sources, discussions on this matter have also takenplace with the management of the Sui Southern Gas Company Limited (SSGCL),which operates in the Balochistan province. The proposal comes inanticipation of the approaching winter season, which is just a few monthsaway.
One source emphasized the importance of safeguarding low-income consumers,particularly in Balochistan, as they become more vulnerable due to the coldweather that grips the province during winter. The source mentioned thedesire for a specialized tariff for low-income consumers in Balochistan,but highlighted that it would cost approximately Rs10 billion annually.Considering the accumulated impact from previous years, sustaining such atariff might become challenging.
The government’s aim is to shield low-income consumers from the potentialshock of gas price increases. Additional sources revealed a proposal toprovide direct subsidies to low-income gas consumers to shield them fromthe effects of rising gas prices.
It is suggested that the government might offer subsidies through theBanazir Income Support Programme (BISP) to the low-income segment of gasconsumers. Currently, the government utilizes cross-subsidization tosupport low-income gas consumers.
The sources stressed that the government is intensifying efforts tofinalize the scenario for a natural gas price increase, as theInternational Monetary Fund (IMF) is increasing pressure to raise gasrates. Senior officials from the petroleum and finance departments, alongwith the Oil and Gas Regulatory Authority (Ogra), convened on Monday tofinalize the proposed gas price hike, estimated to be between 45% and 50%.
An official from the energy ministry confirmed that the IMF hasintensified pressure on the government to implement the gas price hikestarting from July 1, 2023, as determined by Ogra on June 2, 2023. In June,Ogra announced a 50% increase in gas prices for Sui Northern Gas PipelineLimited (SNGPL) consumers, raising the subscribed gas price to Rs1238.68per MMBTU.
For SSGCL consumers, the regulator increased the gas price by 45% toRs417.23 per MMBTU. Sources added that the SNGPL still carries anaccumulated shortfall of Rs560.378 billion up to FY23, while the SSGCL hasa shortfall of Rs97.388 billion. This results in a total existing shortfallof both gas companies amounting to Rs657.766 billion.
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Delayed revisions in gas prices from July 1, 2023, have contributed to theaddition of Rs500 billion to the circular debt in the gas sector. Theofficial emphasized that people in remote areas are compelled to useexpensive gas cylinders, while urban areas with piped gas connections enjoylower prices.
The government is working on various strategies to optimize gas productionfrom depleting fields, reopen closed wells using advanced technologies, andincrease oil and gas exploration and production activities across thecountry. Additionally, there are plans to unbundle gas companies to enhanceefficiency and reduce unaccounted-for gas (UFG).
The government envisions consolidating gas transmission and dividing gasutilities into smaller entities to minimize losses and improve performance.Managing the circular debt remains a significant challenge for thegovernment, and efforts are being made to reduce it through bookadjustments between different companies.
Currently, liquefied natural gas (LNG) contributes significantly to thecircular debt, as previous governments directed expensive LNG towardsdomestic consumers during the winter season, albeit at a high cost. Threestate-run utilities, including SNGPL, Pakistan State Oil (PSO), andPakistan LNG Limited (PLL), are entangled in the circular debt due toflawed policies that diverted LNG towards domestic consumers during thewinter season.
SNGPL has pending payments of Rs476 billion to PSO for LNG supply, and theabsence of a legal framework to recover LNG bills from domestic gasconsumers has contributed to the circular debt. Efforts are underway toimplement the weighted average cost of gas bill, which could help reducethe circular debt and recover the full cost of LNG. This initiative isaimed at addressing these challenges in the gas sector.
