Rs384 Bln Gas Subsidy To Be Given To Protect Common Mans Interests : Energy Minister

ISLAMABAD, (UrduPoint / Pakistan Point News – 31st Oct, 2023) Minister for Energy Muhammad Ali on Tuesday said that the government would provide around Rs 384 billion subsidy to gas consumers of different sectors including domestic, Tandoor, and Fertilizer aimed at lessening the inflationary impact on the common man.

Addressing a news conference on the gas prices’ revision along with Minister for Information and Broadcasting Murtaza, he elaborated that Rs 139 billion gas subsidy would be given to domestic consumers, Rs 45 billion to the fertilizer sector, and Rs 200 billion to Roti tandoors.

“The government has completely unchanged the sale price for gas supplies to Roti tandoors because “Roti” is a prime and foremost necessity” he added.

He said, that it is still ensured that the monthly bill of protected class does not exceed Rs.900 on consumption of 0.9 hm3 in a month.

He said, the Fertilizer prices are kept in line with the Mari gas field’s cost of gas which is Rs.580 per mmbtu, only an Rs.70 increase over the previous price just not to affect the farmers getting urea and ensure food security.

He said, that Industry tariffs are set so as to rationalize the gas prices in the North and South regions and create a level playing field for everyone by offering gas at the same price to existing and new industries.

The minister said that the Petroleum division in consultation with stakeholders has developed a Regionally Competitive Energy Tariff (RCET) considering the industries in India, Bangladesh, and Vietnam, which have developed themselves and emerged as net exporters.

He said measures are focused on the conservation of gas in sectors where gas use is inefficient, unbridled, or where alternate fuels are available. “More than 50% of the Commercial category consumers in the country already use LNG. More than 27% of the gas connections in the CNG category are RLNG-based. The efficiency adjusted cost of CNG is almost half of that with petrol in equivalent terms” he added.

The minister said, that the pricing decision has been a very difficult one for the caretaker government but the decision had been taken in the best interest of the country.

He said, “If the gas prices are not increased, the estimated revenues for Financial Year 23-24 would be Rs.513 billion i.e. deficit of Rs.191 billion from Estimated Revenue Requirement (ERR) Financial Year 23-24 on NG and deficit of Rs.210 billion on RLNG, cumulatively ~ Rs.400 billion”.

He said that the deficit of the two gas companies had increased manifold during the last 10 years due to the difference of the purchase and sale price of gas.

The minister said, that inadequate gas pricing in the previous governments and no financing for the imported gas diversion over the years dented the national exchequer and created a circular debt stock of Rs. R 2.1 trillion (without interest).

Muhammad Ali expressed hope that adjusting gas prices according to the directions of the Oil and Gas Regulatory Authority (OGRA) would help reduce the growth of the circular debt, lower inflation, control interest rates, and decrease fiscal deficits.

He also anticipated that the new gas prices would attract more international companies to invest in the exploration sector

He expressed the hope that pricing of the gas as per the directions of OGRA would stop the increase of circle debt, decrease inflation, control interest rates, and decrease fiscal deficit.

He expressed the hope that the introduction of new gas prices would encourage more international companies to come in the exploration sector.

He said, that 57% of the domestic gas connections fall in the protected category where there is no increase in gas price. A fixed bill of only Rs.400 per month is being introduced. “It is still ensured that the monthly bill of a protected class does not exceed Rs.900 on a consumption of 0.9 hm3 in a month” he added.

He said, that for unprotected categories, the tariff is increased on a progressive basis with higher income households paying the higher tariff. This is to ensure that middle-income households are not burdened unnecessarily.

The minister said the fixed rate (line rent) for the 5.7 million gas consumers had been increased from Rs10 to Rs400, adding the new tariff would marginally affect the protected gas consumers.

The minister further said the government has supported the middle and protected consumers. “About 93 percent including 36 percent middle calls and 57 percent protected consumers will pay less price than the actual price of the gas” he added.

He was of the view that most of the people living in rural areas had no access to gas and were using Liquefied Petroleum Gas (LPG) and wood as sources of fuel.

“Approximately 30% of the country’s population has access to gas facility while this commodity is not available for 70% of the population and they are using LPG and wood as fuel,” he added.

Ali further explained that in terms of consumption, 57% of households primarily use 31% of the total gas and account for 11% of payments.

He said that the upper class, which constituted 3% of gas connections, used 17% of the gas, leading to a 39% billing rate.

The rapidly dwindling natural gas reserves at a rate 5-7% per year are burdening the national gas basket with more expensive imported fuel (LNG).

He said that the previous governments retained control of pricing a scarce commodity instead of strengthening the regulator and creating strong internal controls in the system for transparency and efficiency.

He said, being the urban phenomenon, only 30% households of in Pakistan are availing of piped gas and the remaining population of the country is either using LPG in cities and towns and biomass, wood, and cow-dung in rural areas with some exceptions.

He said the gas price for the export-oriented industries had been brought to the level of regional countries, adding a uniform gas tariff had been put in place for the old and new industrial gas connections.

“The gas tariff difference between the North and South regions for the industrial sector has also been narrowed” he added.

However, he said, that the gas rate had been increased for non-export industries.

The Petroleum Division envisages to discourage captive usage by export and non-export customers and has kept their prices higher than process.

He said, more than 50% of the Commercial category consumers in the country already use LNG. More than 27% of the gas connections in the CNG category are RLNG-based.
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