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The Economic Coordination Committee (ECC) of the federal cabinet on Monday approved a significant increase to the gas tariff, boosting fixed monthly charges for all consumer slabs ahead of an International Monetary Fund (IMF) review scheduled for later this month.
Chaired by interim Finance Minister Shamshad Akhtar, the ECC decided to implement the hike from Nov. 1, 2023, noting it was due to be revised upwards from July 1, 2022. According to the summary approved in the meeting, fixed monthly charges for protected consumers have been increased from Rs. 10 to Rs. 400 and for the non-protected utilizing up to 1.5hm3 from Rs. 460 to Rs. 1,000. Similarly, for non-protected utilizing over 1.5hm3, fixed monthly charges have been raised from Rs. 460 to Rs. 2,000.
The overall tariff stands to increase by up to 194 percent. The ECC approved a 50 percent increase in tariff for residential consumers using up to 0.25 hcm to Rs. 300/mmBtu; consumers who use between 0.26 hcm to 0.6 hcm would now pay Rs. 600/mmBtu, 100 percent increase; and for those using up to 1 hcm, the price has surged by 150 percent to Rs. 1,000/mmBtu.
For slabs using between 1 hcm to 3 hcm, prices have been increased by 173 percent, going from Rs. 1,100 to Rs. 3,000/mmBtu.
Meanwhile, the tariff for bulk consumption has increased from Rs. 1,600/mmBtu to Rs. 2,000. However, the special commercial category (tandoor/roti) would remain unchanged at Rs. 697/mmBtu.
For commercial consumers, the tariff has been hiked by roughly 136 percent to Rs. 3,900/mmBtu. The new rates for cement factories and CNG stations have soared to Rs.4,400/mmBtu. The ECC also increased tariffs for export-oriented industries to Rs. 2,050/mmBtu, while non-export industries would now have to pay Rs. 2,600/mmBtu.
The decision to increase the tariffs has been motivated by a desire to reduce a ballooning circular debt, with the SSGC and SNGPL claiming a deficit of Rs. 46 billion from July to September alone. The country is also rapidly depleting its natural gas reserves, with the Petroleum Division estimating they are declining by a compounding annual rate of 5-7 percent.
Other decisions
The ECC also allowed the import of one million tons of milling wheat via the Trading Corporation of Pakistan during the ongoing fiscal year through an open tendering process to maintain strategic reserves. In this regard, it instructed the Ministry of National Food Security and Research to arrange for third-party verification of the country’s wheat stock. Additionally, it approved a proposal encouraging the private sector to import milling wheat so long as it aligns with the criteria set out in the Import Policy Order 2022.
The ECC further approved a summary submitted by the Ministry of Industries and Production regarding measures taken to meet the requirements of urea for rabi season 2023-24 and endorsed the immediate import of 200,000 tons of urea fertilizers. It further directed authorities concerned to ensure an uninterrupted supply of gas for the fertilizer industry and decided to ask provinces to act more proactively to bear the import costs.
The meeting also deliberated over a summary submitted by the Earthquake Reconstruction and Rehabilitation Authority (ERRA) for a technical supplementary grant of Rs. 484 million to meet critical expenditure on pay and allowances of 415 contract and project employees from July 2023 onwards. It directed the Planning Ministry to identify funds to finance these salaries.
A summary of the Ministry of Finance regarding the establishment of the National Credit Guarantee Company Limited to support the credit enhancement of small- and medium-enterprises (SMEs) was also considered and approved by the ECC.