Eyebrows raised over massive tariff hike sought by gas firms

ISLAMABAD: The new government functionaries have raised eyebrows over petitions of gas companies submitted to Ogra, seeking up to 380 percent hike in gas tariff for the next financial year 2024-25 applicable from July 1, 2024. Officials termed the projections in the petitions as highly exaggerated that need to be rationalized.

According to well-placed official sources in the Energy Ministry, Sui Southern has asked for an increase in gas price by Rs274.4 per MMBTU, but Sui Northern pleaded for a massive increase of Rs2,646.18 per MMBTU from July 1, 2024, putting the gas price at Rs4,447 per MMBTU. The gas companies have included the previous years’ shortfall of Rs600 billion in their petitions, asking for a massive increase from July 1, 2024.

To recover Rs600 billion in one go, the end consumers need to pay Rs2,170 per MMBTU. In addition, the end consumers will also have to pay Rs325.08 per MMBTU in the head of RLNG cost of Rs76 billion to be incurred in the next financial year 2024-25.

“We have decided to summon the top managements of both gas companies to rationalize their petitions. The gas consumers have already experienced a two-time increase in gas prices – up to 193.3 percent from November 1, 2023 and then up to 67 percent from February 1, 2024. The government has increased the gas price massively in the current financial year 2023-24 to mop up the revenue target of Rs902 billion, knowing the fact that the revenue requirement for current fiscal stands at Rs701 billion. While consumers are under pressure, the gas companies have submitted their new petitions for 2024-25 based on exaggerated assumptions.”

The officials said that the maximum increase from July 1, 2024 may hover between 10-15 percent after rationalizing the assumptions, excluding the previous years’ shortfalls. They hoped that Ogra would not allow the gas companies to recover huge previous year shortfalls from consumers in one go as it did in the past. However, the regulator needs to stagger the impact of previous years’ shortfalls and likewise, the RLNG diversion cost to the domestic sector also needs to be reviewed. The top mandarins of the ministry want to limit the use of RLNG in the domestic sector as it causes a hike in the tariff.

In the ongoing fiscal, the RLNG cost of Rs232 billion is estimated to be incurred on RLNG diversion from November 2023 to March 2024. However, the cost of RLNG diversion of Rs250 billion to the domestic sector during the period FY19 to FY22 has not been recovered so far and it has become a part of the circular debt of Rs2.9 trillion.

Officials said out of Rs2.9 trillion circular debt, Rs1 trillion had been added just because of no increase in gas prices in the last 10 years. “Ogra used to give determinations but the government avoided an increase in gas tariff. Because of this very fact, Rs1 trillion has been added to the circular debt.”