ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Wednesday approved a hike in gas prices for households and industrial consumers to raise an additional Rs 242 billion, but could not finalize the rates due to competing interests of Cabinet members.
The ESC has also approved the imposition of 25% sales tax on all categories of SUVs and CUVs valued above Rs 4 crore, exclusive of taxes. The decision will provide an additional revenue of Rs 4.5 billion to the Federal Bureau of Revenue (FBR).
The gas price hike issue is likely to reach the Federal Cabinet on Thursday and the Petroleum Division is in the process of working out new rates for domestic consumers and own power plants in the light of the discussions held at the ECC meeting.
February 15 is the last date to meet the condition of the International Monetary Fund (IMF) to increase gas prices and meet the obligation to increase rates for own gas plants in industrial sectors.
There was uncertainty over the new gas rates for the Fauji Fertilizer Bin Qasim Limited (FFBQ) plant, which was benefiting from Rs 10 billion in subsidies. The Ministry of Finance wanted to withdraw it.
The Industries Minister has again opposed a Rs 750 per million British thermal unit (mmbtu) or 34% hike in gas prices for industrial-owned in-house power plants. But he agreed to a nominal increase in rates.
The Minister of Energy tried to raise rates in line with the commitments given by the IMF.
ESC Chairman and Finance Minister Dr Shamshad Akhtar said in the meeting that gas prices should be rationalized for fertilizer factories that were using subsidy paid by bulk buyers, consumers of electricity, industry, cement and compressed natural gas (CNG).
The subsidy of Rs 39 billion on input and heating gas for Engro Fertilizers was withdrawn and the ECC approved a new rate of Rs 1,597 per mmbtu.
In a statement, the Finance Ministry said that the Petroleum Division’s summary titled “Natural Gas Sales Prices FY 2023-24 Effective February 1, 2024” was discussed in detail.
“After discussion, the ECC decided that the revision of the selling price and tariff should be in line with Sui’s revenue requirements,” the ministry said.
The ECC has been informed that the Oil and Gas Regulatory Authority (Ogra) has set a revenue requirement of Rs 205 billion for Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC). After taxes are included, consumers would be forced to shell out an additional Rs 242 billion, sources said.
The finance ministry said the ESC had recommended a uniform gas price for fertilisers, which should lead to the removal of subsidies.
Engro was paying just Rs 200 per mmbtu for input gas, which will now rise to Rs 1,597. The Petroleum Division proposed Rs 760 per mmbtu, but the Finance Minister raised it to Rs 1,597.
The additional sum to be collected from Engro will be used to moderate the proposed rise in household gas prices. The Petroleum Division has proposed a 5 to 67% increase in household gas prices.
The new rates will be presented to the federal cabinet on Thursday after factoring in the impact of additional revenue from the Engro plant.
