Caretaker Government Approves Increase in Natural Gas Tariff to Meet IMF Deadline


Under pressure to meet the February 15 deadline set by the International Monetary Fund (IMF), the caretaker government in Islamabad allowed for an additional up to 45 per cent increase in the natural gas tariff, effective from February 1. This decision was made during a meeting of the Economic Coordination Committee (ECC) of the Cabinet chaired by Caretaker Finance Minister Dr Shamshad Akhtar. The move aims to meet the revenue requirements of the gas utilities targeted for the current year.

The ECC meeting resulted in adjustments to the rates of increase proposed by the Petroleum Division. These adjustments, to be incorporated in a revised summary, are scheduled to be presented to the federal cabinet on Friday for formal approval and notification.

According to a statement from the Ministry of Finance, the ECC decided that the revision of sale price/tariff should align with the revenue requirements of the Sui companies.

The Petroleum Division informed the ECC that the revised estimated revenue requirements, determined by Ogra for the current fiscal year, amounted to Rs592bn for SNGPL and Rs310bn for SSGCL. This brought the total revenue requirement to Rs902bn, resulting in an average prescribed price of Rs1,596 per mmBtu.

Sources familiar with the matter disclosed that the ECC opted to slightly reduce the proposed increase for protected domestic consumers and pass on its impact to other sectors such as fertiliser and industry.

The government had committed to the IMF to continue regular end-user gas price updates in line with revenue and legal requirements. The ECC’s decision aims to implement the notification for Ogra-determined gas price adjustments by February 15, aiming to reduce large preferential cross-subsidies across industrial and commercial users while further disincentivising captive gas use.

As per the decision, protected domestic consumers with less than 0.25 hundred cubic metres (hcm) consumption will face an increase of Rs50 per unit, bringing the tariff to Rs170 per mmBtu from the existing Rs121 per unit, marking a nearly 41% increase.

Furthermore, non-protected residential consumers can expect an increase of up to 27%, with rates rising by Rs250 to Rs350 per unit. The ECC also recommended uniform gas tariffs for fertiliser plants and directed investigations into the recent increase in urea prices.

The revised rates, along with notifications, will be shared with the IMF following the cabinet meeting. Additionally, the ECC approved various other proposals, including sales tax rationalisation and technical supplementary grants, to address financial requirements.

Related posts