ISLAMABAD: The opposition has outrightly trashed the government’s plan to hike gas tariff by up to 35 per cent for domestic consumers for the upcoming winter season as the leader of the opposition in the National Assembly Shehbaz Sharif on Saturday strongly condemned the reports of 35 per cent increase in gas prices and demanded immediate withdrawal of the decision.
It should be noted that the Petroleum Division has prepared a summary of the increase in tariffs for gas consumers. Reportedly, the government’s proposed inverse gas tariff plan seeks to massively increase prices for 43pc of sale volumes to partially finance the cost of gas supplies to “protected” lower-end consumers.
This is part of the fresh cross-subsidy mechanism for gas prices under consideration of the Cabinet Committee on Energy (CCoE) to force shifting of space and water heating to electricity instead of natural gas in four peak winter months (November-February). It is yet to be seen, however, if enough electricity efficient space and water heating appliances are available in the market to facilitate this transition at a cost affordable and acceptable to consumers.
The petroleum division has reported that about 47pc (over 5.3224 million) gas consumers in the first slab consumed about 32pc of gas volumes. They are charged at the rate of Rs121 per Million British Thermal Unit (MMBTU) and their monthly bill works out at Rs308.
Another 30pc of 3.424 million consumers in the second slab (up to 100 cubic metres) burn about 25pc of gas sales. They are charged at Rs300 per MMBTU and their monthly bill currently stands at Rs957. This means that 57pc gas is consumed by 77pc (or 8.7464m) consumers that the petroleum ministry seeks to protect with no price change.
The third slab (200 cubic metres per month) pertains to almost two million consumers with 18pc of gas consumption. They are currently charged at Rs553 per unit and their monthly bill works out at Rs3,733. The petroleum division has sought their rate to go up by about 24pc to Rs683 per unit, showing an increase in the monthly bill to Rs4,300.
Also, just 3.3pc (or 371,000) consumers fall in the fourth slab with monthly consumption of 300 cubic metres and are currently charged at Rs738 per unit, translating into the monthly bill at Rs8,016. The petroleum division has suggested the price for this category to increase by 35pc to Rs1,000 per unit that would increase its monthly bill by Rs2,260 to Rs10,272.
For the fifth slab of up to 400-cubic-metre consumption, about 93,000 consumers (0.8pc of total) are currently charged at Rs1,107 per unit, taking their bill to Rs14,400 per month. The petroleum division has proposed a 36pc higher rate of Rs1,500 per unit for consumers in this category, increasing their monthly gas bill by Rs5,100 to Rs19,500.
There are about 49,400 (or 0.4pc) consumers in the sixth and last slab of over 400-cubic-metre monthly consumption who utilise about 3pc gas sales. They are currently charged at Rs1,460 per unit that the petroleum division has suggested going up by 37pc to Rs2,000 per unit. The monthly bill in this category at Rs25,500 would jump by Rs9,130 a month to reach Rs34,625.
The petroleum division has reported that two public sector gas utility companies – Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) – were facing challenges as their indigenous gas supply sources have depleted and no net increase or addition has been witnessed. The import of RLNG to make up for the supply gap had a substantial impact on their full cost recoveries due to drastic differences in the tariff for indigenous gas and imported RLNG.
Against the total availability of gas in Pakistan, the residential sector has emerged as the second-biggest gas consumer after power and fertiliser. The primary use of gas for residential consumers is cooking in summers and additional usage for water heating and space heating in winters, resulting in a steep increase in demand and consumption of gas – about 50pc increase for SSGCL and more than 100pc for SNGPL.
The substantial difference in the tariff of indigenous gas and RLNG has increased the un-recovered tariff differential to Rs104bn for SNGPL alone. Historically, the indigenous gas tariff structure for residential consumers has remained cross-subsidized and the differential to the actual cost of supply was charged to other consumers i.e. commercial, industrial, power and CNG.
This structure of lower tariff for residential consumers has resulted in the accumulation of tariff differential on the balance sheets of SSGCL and SNGPL who are unable to pay the cost of gas purchases from public sector gas producers.
The present gas tariff structure for residential consumers was approved in July 2019 and is still in place. The current tariff for domestic consumers results in an average sale price of Rs400 per MMBTU of gas for SSGCL and Rs350 per MMBTU of gas for SNGPL, respectively, while the average cost of supply for both the companies is Rs683 per MMBTU.
The petroleum division has argued that natural gas was a scarce resource and its efficient utilisation for the growth of the economy was unavoidable.
Therefore, residential consumers using gas for space and water heating should switch to electricity to reduce capacity payments against installed power generation capacity as well as minimising the burden on the gas supply chain.
Impact on consumers:
According to the data, there will be an additional bill of Rs. 562 for use of gas up to 200 cubic meters, Rs. 2,256,000 for 300 cubic meters and Rs. 5,095 for use of 400 cubic meters and Rs. However, it would not apply to domestic consumers using gas up to 100 cubic meters.
According to the document, the monthly bill of Rs 8,000 will reach Rs 10,272, the monthly bill of Rs 14,400 will reach Rs 19,000 and the monthly bill of Rs 25,495 will reach Rs 34,622. In case of an increase in tariff, the monthly bill of Rs. 3,733 will reach Rs. 4,295. In addition, 78% of consumers who use 57% gas will avoid the additional burden. Sui Southern and Sui Northern Gas companies are facing a reduction in gas reserves. The average cost of gas for both companies is Rs. 683 per MMBTU.
The average sale price of Sui Southern is 400 MMBTU while the selling price of Sui Northern is Rs. 350 per MMBTU. Receiving Rs 104 less than RLNG, gas consumption in Sui Southern Region increases from 400 to 600 mmcfd in winter.
Shehbaz wants immediate withdrawal of proposal:
Pakistan Muslim League-Nawaz (PML-N) President and Opposition Leader in National Assembly Shehbaz Sharif strongly condemned the reports of an increase in gas tariff, saying that the government is fulfilling the conditions which were imposed on the people by the IMF in the name of budget.
“The government lied to the nation about the tax-free budget, while what we said is becoming true today,” he added.
“We had said that after the budget there would be a new flood of inflation and taxes, the government proved our point, the increase in gas prices was unjustified and another serious folly of the government,” the PML-N president said.
The opposition leader further maintained that the people won’t be able to bear more burden of inflation, adding that oppression should be stopped. “Imran Niazi is trying to wage a civil war in the country with his successive follies.”
Shehbaz Sharif said that there has already been a historic increase in gas and electricity prices, further hiking in prices will not solve the problem but the problem is incompetence and corruption of the rulers.
The former Punjab chief minister mentioned that if the increase in gas and electricity prices had solved the problem, the revolving debt of gas would not have been borne by the nation after the increase in electricity. “Rising prices will push up the price of bread and increase people’s bills,” he added.
“I had earlier pronounced that the government had done 9/11 of the country’s economy, now it is making the nation’s balance sheet with inflation.”
He further said that Imran Niazi should go home instead of committing the sin of killing the nation with inflation. “Everything including flour, sugar, ghee, medicine, electricity and gas has gone beyond the limits of inflation. Inflation has made the life of the poor miserable,” he concluded.
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