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IMF diktat: Authorities mull 100% increase in gas tariff for protected consumers

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9 months ago

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  • Gas system faces Rs100 billion deficit on their account.
  • Govt mulls ending disparity between export and non-export sectors.
  • IMF has asked Pakistan to curb circular debt in energy sector.

ISLAMABAD: The federal government is planning to hike gas tariff for protected consumers and end disparity in gas tariffs between export and non-export industries from January 2024 in line with International Monetary Fund (IMF) conditions, The News quoted a senior energy ministry official as saying on Tuesday.

The official told the publication that the authorities are working on a staggered increase for ‘protected residential consumers’ across the country from January 2024, as the gas system faces an Rs100 billion deficit on their account.

This yet another increase, follows the 193% gas tariff hike in November 1, 2023. In that however, the protected gas consumers didn’t experience any increase except for that in meter charges from Rs10 to Rs400 per month. These protected gas consumers constitute 57% of the total countrywide consumers.

The authorities want to increase the gas prices of the protected consumers by 100% in two phases, in January and July 2024, which are currently at the lowest ebb compared to the other categories of domestic consumers. Therefore, it would do away with the Rs100 billion deficit incurred on the facility in a staggered manner.

Under the IMF diktat, the government is also set to end the disparity of gas tariff between export and non-export industries in January 2024 which will fetch them a Rs20-30 billion more revenue. The export and non-export sectors will be treated as one industrial sector with uniform tariffs, top officials of the energy ministry told The News. 

In addition, the IMF also wants the government to do away with the cross-subsidies of Rs27 billion being extended to the fertilizer giants — Engro Fertilizer in the Sui Northern system and Fauji Fertilizer Bin Qasim Limited in the Sui Southern system.

“Those captive power plants connected with the natural electricity grid would not be provided gas, but those not connected with the national grid will now get the RLNG and not the local gas. The government is working to increase the gas tariff for the export sector by Rs100 per MMBtu both for export and captive plants to bring their tariff at par with the tariff of non-export industry.” 

“According to IMF directions, these measures would generate additional revenue of over Rs100 billion. This would scale down the natural gas circular debt that currently stands at Rs1,250 billion,” officials said.

At present, the gas tariff for the export sector stands at Rs2,100 per MMBtu and for non-export is at Rs2,200 per unit. The gas tariff for captive power plants for the export industry stands at Rs2,400 per MMBtu and for captive power plants of the non-export industry is at Rs2,500 per MMBtu. 

“The authorities want to end the disparity between their tariffs which will help raise the revenue of Rs20-30 billion per year.”

Coming towards the cross-subsidy of Rs27 billion being extended to the fertilizer sector, the officials said that the gas tariff for feedstock stands at Rs580 billion and Rs1,580 per MMBtu as fuel. The authorities want to end the cross-subsidy of Rs27 billion by bringing their tariff to Rs1,271 per MMBtu both for feedstock and fuel purposes.

Despite the rise, they argued that the expected increase for protected consumers would stay much below that of the other categories. In the first phase from January 2024 it would reduce to half the Rs100 billion deficit. The next phase of a hike from July 1 will remove the remaining Rs50 billion deficit.

According to the revised calculation in wake of the proposed increase, 0.25hm3 category will pay Rs242 from existing Rs121 per MMBtu, 0.5hm3 consumers tariff will hike to Rs300 from Rs150 per MMBtu, 0.6hm3 consumers tariff will go up to Rs400 from Rs200 per MMBtu and 0.9hm3 category of consumers tariff will be at Rs500 from Rs250 per MMBtu.

The government has already increased the gas tariff by up to 193% from November 1, 2023 under which it will collect revenue of Rs980 billion in the ongoing FY24 even though the revenue requirements of both the gas companies stand for ongoing FY24 at Rs705 billion. 

This has allowed the collection of an additional Rs275 billion to pay the Rs210 billion cost incurred for RLNG diversion to the domestic sector in the ongoing winter season. It also offsets the loss of Rs65 billion incurred due to the failure of the government to notify gas price hike four months late.

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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3 days ago

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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