ISLAMABAD: The Economic Coordination Committee (ECC) is expected to accept an increase of up to 15 percent in gas rates on Wednesday to meet its commitments to the International Monetary Fund.
The meeting, which will be chaired by the financial advisor to Prime Minister Abdul Hafeez Shaikh, will also consider establishing a trust fund to implement a joint venture facility under a $ 10 million World Bank loan and order the State Bank of Pakistan (SBP) that sells its shares in the Housing Construction Financing Company (HBFC).
A summary transferred by the Petroleum Division to the ECC proposed a 5-15pc increase in the gas rate for different categories of consumers. The ECC had considered the summary on January 20, but suspended the matter due to the controversy prevailing at that time over the increase in the price of wheat and sugar.
The division in its summary said that, in accordance with the law of the Oil and Gas Regulatory Authority (Ogra), the federal government must “inform Ogra the sales prices of gas by category for notification in the official bulletin within the forty days, that is, on January 20, 2020. ”
He said the division has changed Ogra’s recommendations by reducing the proposed price increases for the poor and the lower middle class.
The summary, however, proposed an increase of approximately 400 pieces in the rental of meters for domestic consumers from Rs20 per month to Rs80. The division said the meter’s income was last fixed in 1997.
The summary proposed a 5 percent increase in the gas rate for domestic consumers with lower consumption, a 12 percent increase for power plants and a 15 percent increase for industrial captive power plants and natural gas stations compressed (CNG).
The division said Ogra had determined an income requirement of Rs274.2 billion for Sui Northern Gas Pipelines Limited (SNGPL) and Rs282.9bn for Sui Southern Gas Company Limited (SSGC) on December 11, 2019.
At the existing gas prices, the two companies faced an accumulated loss of approximately Rs35bn. The division said Ogra’s recommendations had been reviewed and that revisions were made in various categories and bosses to protect the income requirement determined by the regulator.
In addition to the previous increases, the division envisaged in its summary that the gas rate for the entire general industry with zero rating and its captive power plants at $ 6.5 / mmBtu (Rs1,000 / mmBtu) regardless of location, both SNGPL as SSGC.
For captive power plants other than the zero rating industry and CNG, a 15pc rate increase was proposed.
In a significant move, the division also recommended that fertilizer plants receive fuel at the price of regasified liquefied natural gas: Rs 1,672 / mmBtu, which is the current price of LNG.
In addition, the minimum billing volume for domestic and special commercial consumers (tandoors) would be reviewed from 40 cm per month to 50 cm per month, for which the invoice against gas charges will be Rs220 per month.
Likewise, the minimum monthly charges will be determined by Ogra considering the consumption of 140 cm per month for bulk domestic consumers, commercial sectors, ice factories and 1,000 cm per month for other sectors that use the average gross calorific value (GCV) of the gas of the system in the country.
The summary says that approved prices for SNGPL and SSGC consumers will also apply to consumers in the fertilizer and energy sector who were supplied with gas directly from the Mari Petroleum Company Limited and Pakistan Petroleum Limited fields.
The sale price of the gas for Liberty Power supplied by SNGPL and for Uch Power supplied by Oil and Gas Development Company Ltd shall be determined in accordance with the formula / price mechanism already approved.
The ECC is also expected to approve the establishment of a trust fund to implement a joint venture facility under the third tranche of $ 10 million of a $ 140 million credit line from the World Bank for Pakistan Mortgage Refinance Company Limited.
The bank has already disbursed around $ 130 million in two tranches for the Housing Financing Project.
In addition, the meeting is expected to allow an out-of-court settlement for the pending Coniston conflict against Pakistan Steel Mill that led to the arrest of ships of the National Transportation Corporation of Pakistan in South Africa a couple of years ago.
The committee will consider the approval of approximately 180 million rupees of supplementary technical grants and will take a presentation on “Comprehensive policy to improve cotton production in the country”.
Updated Feb 11, 2020