Govt Decided To Increase Natural Gas Price Up To 113%, As Per IMF Conditions

ISLAMABAD: As Per The International Monetary Fund (IMF) program conditions, the government approved on Monday an increase in natural gas prices of up to 113% in order to recover Rs310 billion from the majority of consumers within six months. This will add a minimum of Rs736 billion in additional costs to citizens in the form of taxes and energy costs.

Although the government began enforcing each of the IMF’s conditions to revive the program, it had not yet demonstrated its willingness to reduce the size of the cabinet or levy taxes on traders and the stock market.

The Economic Coordination Committee of the Cabinet (ECC) made the decision to impose a maximum tax of 113% on domestic customers whose monthly consumption exceeded four cubic meters.

In addition to “optimizing” the previous slab benefit, domestic consumers’ prices increased by 8.5% to 113%.

The details revealed that gas prices had increased from 10.4% to 105% for the bulk, commercial, power producers, fertilizer plants, cement exporters, general industry, CNG stations, and general industry.

The increase was necessary to prevent the bankruptcy of both gas supply companies, which had already experienced a revenue shortfall of Rs577 billion since 2013.

According to the Ministry of Finance, the Petroleum Division presented tariff proposals for all consumer groups in accordance with the Revised Estimated Revenue Requirements (RERR) for fiscal year 2022-23. Additionally, the Petroleum Division tabled a summary on Natural Gas Sale Pricing for FY 2022-23.

The statement reads as follows: “After a detailed discussion, the ECC approved a gas price revision proposal for the domestic, commercial, and power sectors for six months – January to June 2023.”

The government had so far met the IMF’s conditions for reaching a staff-level agreement, which included raising gas and electricity prices, in addition to the new approval.

According to the information, gas customers would have to pay an additional Rs310 billion in just six months.

To recover an additional Rs237 billion until June, the government had already increased electricity prices by Rs3.30 to Rs15.52 per unit. By June 2023, an additional burden of Rs189 billion would be added through tax increases.

These three measures, taken together, would require the people to pay an additional Rs736 billion in just six months. This cost was increased because the government failed to timely revive the IMF program.

The Finance Minister Ishaq Dar began complying with condition after condition, including allowing the rupee to rise to almost Rs100 per dollar above Dar’s desired threshold four months ago.

On Monday, the IMF team and the government discussed the government’s new position regarding the MEFP’s first draft.

The government created a new group of protected customers whose rates were lower than those of customers who were not protected.

Protected customers would also be required to pay a one-time fee of Rs50 per month in addition to the usual rates for gas use.

In addition to the meter rent, non-protected customers would pay a fixed monthly fee of Rs500.

The decision would take effect on January 1 if the federal cabinet approved it.

The ECC approved a 24% increase in the price of gas to Rs150 per MMBTU for residential customers who use up to 0.5 cubic meters of gas per month. At the time, their rate was Rs121. Prices for customers who use less than 1.5 cubic meters of gas have increased by 8.5% to Rs600 per MMBTU.

The cost of gas for a household of two cubic meters per month had increased by Rs247, or 45 percent, to Rs800 per MMBTU.

Up to three cubic meters of gas would now cost Rs1,100 per MMBTU, an increase of Rs362 or 49% over the previous prices. For this category, the current rate was Rs738 per MMBTU.

However, consumers who consume more than three cubic meters of gas per month were subjected to a significant financial burden. Consumers of up to four cubic meters of gas would pay Rs2,000 per MMBTU, an increase of Rs893 or 81 percent, in comparison to the current rate of Rs1,107.