Govt To Increase Gas Prices From Feb 15

Muhammad Haris

The government is expected to increase the gas price effective from Feb 15, the second round of hikes since entering into the IMF agreement aimed to reduce the circular debt in the gas sector.

According to the document of the International Monetary Fund under the Country Report, it said that the government would raise the price in line with revenue and legal requirements.

The government will implement the notification for OGRA’s scheduled semiannual gas price adjustment, anticipated for December 2023, within the mandated 40-day window new price is likely to be effective February 15, 2024.

The document said that any price adjustment will maintain the current progressive slab structure for domestic consumers and maintain protection for the most vulnerable household consumers, seek to reduce large preferential cross-subsidies across industrial and commercial users, and further disincentivize captive gas use.

Finally, the government will advise OGRA within 40 days to enable the automatic notification of semiannual gas price determinations, in line with the 2022 Amendment to the 2002 OGRA Ordinance.

The gas sector faces unsustainable CD dynamics and urgent liquidity pressures; the government is accelerating reform efforts accordingly.

The gas sector’s CD stock has increased considerably—to an estimated Rs 2,084 billion (2.5 percent of GDP) at the end of FY23, from PRs 1,623 billion (2.4 percent of GDP) at the end of FY22, quickly approaching that of the power sector.

Liquidity constraints have, on the other hand, increased gas shortages. The main driver of this evolution was the non-implementation of regular end-user gas price adjustments in line with semiannual OGRA determinations of prescribed prices since September 2020.

Additional drivers were the accumulation of the re-gasified liquid natural gas (RLNG) tariff differential since FY19, and diversion costs (that mainly reflect the diversion of costly RLNG to domestic consumers during the winter months).

In response the government has started—supported by the World Bank—to take important reforms that aim at generating more cash and reducing circular debt, thus enabling gas companies to invest in their infrastructure and reduce unaccounted-for gas (UFG) losses.Gas Consumers Burdened with Rs 15b to Subsidize Gas for Fertilizer Plants

Specifically, the government has updated end-user gas prices changed the structural end-user gas tariff in February 2023, and updated end-user gas prices again in November, effective November 1, 2023. As part of our ongoing efforts to contain further circular debt accumulation and reform the gas sector, the document said.