Gas Consumers Burdened with Rs 15b to Subsidize Gas for Fertilizer Plants
Staff Report
The federal government has imposed a Rs 15 billion burden on gas consumers to subsidize gas for fertilizer plants.
The caretaker government has decided that the regulator will recover this amount from gas consumers starting January 1, 2024.
This cost was initially to be shared between the federal and provincial governments. However, they refused to provide funds for this purpose.
In line with the decision of the Economic Coordination Committee (ECC) of the Cabinet dated October 3, 2023, both plants will continue to operate on an indigenous gas tariff of Rs. 1,239/MMBtu from November 2023 to January 2024 (three months only).
However, the differential with the RLNG price of Rs. 3,600/MMBtu, which amounts to approximately Rs. 15 billion, is to be equally shared at the federal and provincial levels. The Government of Punjab and Khyber Pakhtunkhwa will fund 50% of the differential amount in the ratio of 81% and 19% respectively.
This funding is in consideration of the supply of urea produced by these plants over three months in the provinces against their estimated demand/consumption in the Rabi season.
Additionally, the remaining 50% of the differential amount is allowed to be recovered through a gas price revision anticipated in January 2024, following the determination by OGRA (Oil and Gas Regulatory Authority) for the Review of Estimated Revenue Requirement (RERR) FY 24 for SNGPL (Sui Northern Gas Pipelines Limited).
OGRA will consider this differential amount in the RERR FY 24 of SNGPL under Section 8(2) of the OGRA Ordinance, 2002.
The Industries and Production Division, in consultation with the Petroleum Division, shall review the option of continuing the operation of both plants beyond January 2024. This review will take into account the urea demand in the Rabi season and submit a workable option to the ECC for consideration.
The Economic Coordination Committee (ECC) of the Cabinet considered the summary submitted by the Petroleum Division regarding the “Supply of Gas/RLNG to Fatima Fert and Agritech to meet the requirement of Urea.”
It approved the continued supply of RLNG to both fertilizer plants on the SNGPL’s network, i.e., to Fatima Fert (Sheikhupura) and Agritech (Mianwali), from November 1, 2023, until December 31, 2023, at the OGRA-determined rate of Rs. 1,239/MMBtu. Ogra Notifies Massive Increase in Gas Prices for Consumers
This measure is to ensure an uninterrupted supply of fertilizer during the Rabi Season, in 2023. The price differential between OGRA’s notified RLNG price and Rs. 1,239/mmbtu will be made part of the revenue requirements of SNGPL by OGRA in its revenue requirement determination in January 2024.
