Government Stands Firm on Gas Price Increase from July Onward Despite OGRA Decision
The federal government has decided not to lower gas prices for all users starting from July 1, 2024, despite a recommendation from the Oil and Gas Regulatory Authority (OGRA) to reduce them by 10% for the next fiscal year.
However, gas prices for captive power plants (CPPs) will increase by Rs. 250 per mmBtu to Rs. 3000 per mmBtu, aligning with demands from the International Monetary Fund (IMF). This adjustment aims to generate Rs. 110-115 billion to help reduce the circular debt, as reported by a national daily.
The Petroleum Division has instructed OGRA to ensure that surplus revenue from Sui gas companies is used to tackle the circular debt issue. The IMF has criticized CPPs for their low efficiency and wastage of natural gas, urging the government to connect all CPPs to the national electricity grid and align their gas prices with RLNG (Regasified Liquefied Natural Gas) prices by January 1, 2025.
In summary, CPP gas prices will rise by Rs. 250 per mmBtu from July 1, 2024, and an additional Rs. 700 per mmBtu from January 1, 2025. Previously, the Petroleum Division requested subsidies from the Finance Division to address circular debt, but the finance ministry did not allocate any in the FY25 budget. Instead, surplus funds from maintaining current gas prices will be used to mitigate losses in the gas sector.
Currently, there are no subsidies for domestic gas consumers, with industrial and high-end domestic consumers providing a net cross-subsidy of Rs. 110 billion annually to protected and some non-protected consumers. The IMF has mandated biannual adjustments to gas tariffs, on July 1 and January 1, to prevent further increases in the gas sector’s circular debt.
