ISLAMABAD: In a bid to recover additional funds to prevent gas companies from bankruptcy, Pakistan’s caretaker government has approved substantial increases in gas prices. The decision, announced a day earlier, includes a variety of pricing adjustments that will impact different consumer segments.
For domestic consumers, gas prices have been increased by up to 172%, with rates set to rise from November 1. Similarly, commercial consumers will face a 137% increase, while cement manufacturers will experience the most significant hike at 193%. These price adjustments are aimed at recovering approximately Rs350 billion from consumers.
The Economic Coordination Committee (ECC) of the Cabinet endorsed these changes, paving the way for formal endorsement by the federal cabinet. However, the decision has sparked discussions and debates, particularly regarding the allocation of subsidised gas to specific sectors.
The Finance Ministry and the Planning Commission opposed the provision of subsidised gas to self-generation power plants, exporters, and domestic industrialists. Their concerns revolved around the allocation of resources and the efficiency of power generation.
Despite these objections, the ECC decided to provide up to 44% subsidised gas to exporters, albeit at higher rates than domestic consumers. This decision is in violation of a federal cabinet decision made in 2021, which had recommended cutting gas to self-generation plants. While these consumers will see an increase in gas prices, the rates will still be $4 lower than prevailing liquefied natural gas (LNG) rates.
The government has not increased gas prices for domestic consumers with up to 0.9 hm3 consumption. However, fixed monthly bills have been adjusted for higher consumption brackets. The highest domestic consumption brackets now align with liquefied petroleum gas (LPG) costs. Despite these changes, some slabs retain benefits for consumers, while others do not.
While these price adjustments are essential to prevent the two gas distribution companies, the Sui Northern Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL), from bankruptcy, the decision has raised concerns about affordability for consumers.
As Pakistan faces the challenge of addressing the gas sector’s circular debt, which has reached Rs2.1 trillion, the government aims to recover Rs395 billion from consumers through these price adjustments.
The decision has implications for the country’s energy and economic landscape, and it will be the subject of continued discussions and debates.
