ISLAMABAD: Federal cabinet members remained divided on Tuesday over a proposed hike in gas prices of up to 69%, amid warnings that any delay beyond Thursday could cost Pakistan $1.2 billion, the latest tranche of an International Monetary Fund loan.
The Cabinet’s Economic Coordination Committee (ECC) had to delay approval after allegedly pro-IMF program members of the Cabinet also spoke out against the new price hike, according to meeting participants.
Minister of Industry, Dr. Gohar Ejaz, representing the textile sector, opposed the hike in gas prices for industrialists’ own power plants fueled by cheaper gas. Two other members opposed the increase in gas prices for households ahead of Ramazan. They also sought time to study the proposal, which was not part of the regular meeting agenda.
The finance minister, also chairman of Sui Southern Gas Company Limited, advocated the abolition of cross-subsidies paid by industrialists to fertilizer factories.
As a result, the ESC had to shelve the summary, which called for up to a 69% increase in prices for domestic consumers and up to a 45% increase for other consumers to recover an additional Rs 242 billion.
The ESC will meet again today (Wednesday) to consider the summary. The IMF set a deadline of February 15 for the increase in gas prices effective from February 1.
The finance minister made it clear to the ECC that without a price hike, the IMF would not complete the next review of the program, which brings the bonanza of the last tranche of the $1.2 billion loan package.
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This would be the third proposed price increase the government has undertaken in the past year. The proposed hike would put an additional burden of Rs 242 billion on consumers, including Rs 37 billion that the government would get from sales tax.
It was the caretaker government’s second gas price review in three months, after previously raising prices by up to 1,108%, the most for the most vulnerable households.
The fresh revision has also put the maximum burden on the most vulnerable households with an increase of 67% or Rs 100 per unit for domestic monthly consumption of 0.5 cubic hectometre (HM3).
Earlier this month, OGRA issued a decision on Revised Estimated Revenue Requirements (RERR) for FY 2023-24 for both SNGPL and SSGCL. According to the revised decision, SNGPL claims revenue of Rs 592 billion and SSGCL claims revenue of Rs 310 billion this fiscal year. The total revenue requirement was set at Rs 902 billion, which translates into an average prescribed price of Rs 1,596 per mmbtu.
