- Minister for Energy Muhammad Ali says increase in gas tariffs will help control and end the ever-increasing circular debt of petroleum sector
ISLAMABAD: Minister for Energy Muhammad Ali on Thursday said the issue of circular debt in gas sector will be resolved everlastingly as many companies were leaving the country due to losses and circular debt.
Addressing a press conference along with Minister for Information and Broadcasting Murtaza Solangi, he said the increase in gas tariffs would not affect 57 percent of consumers across the country rather it would help control and end the ever-increasing circular debt of the petroleum sector.
The minister maintains that after the increase in gas prices, circular debt in the petroleum sector will end.
Protected gas consumers: Rs500 per mmbtu gas tariff hike under study
“After this increase, there will be no rise in flow of circular debt of the energy sector, which currently stands at Rs2.1 trillion,” the Minister added.
Energy Minister said the increase in gas prices had been approved by the Economic Coordination Committee (ECC) and now would be presented before the federal cabinet for ratification. Increase in gas prices will be effective from November 1, 2023 instead of October 1, 2023 as was proposed by the Petroleum Division.
The Minster said, out of around 10 million consumers, gas price for 5.7 million had not been increased.
Muhammad Ali further stated that a commercial oil purchase agreement has been reached with Russia under which 9 million metric tons of oil will be imported annually; he added that it is expected that the Russian crude oil will be 10 to 15 dollars per barrel cheaper.
The ECC has approved the hike in gas prices and now it will be submitted to the cabinet meeting for final approval. The circular debt in the gas sector was 400 billion rupees. The poorest have been protected by the increase in gas prices. The caretaker energy minister said that in the last 10 to 15 years, the circular debt was steadily increasing in the energy sector.
“There are losses in the power sector, our next target is to eliminate the losses in the power sector,” the Minister continued.
He said that the production of oil and gas is less compared to the last ten years and due to losses and circular debt, payments were not being made due to which many companies were leaving the country which will stop.
He said that the increase in gas prices would benefit the exploration companies and the abolition of circular debt was necessary.
Energy Minister Muhammad Ali categorically stated that new gas connections cannot and will not be installed, domestic connections will also have to be shifted to LPG in the next one to two years, and in future gas will be connected to power houses only.
He said gas is used all over the world for power plants instead of at homes. He said that the perception is wrong that the rich have benefited from the increase in gas prices, gas is not available in most villages of Pakistan.
He further said that gas is available to 30% of the people of Pakistan while 70% of the people are deprived of it. LPG is used in most houses, while the rich people get gas at a low price and use it.
He said 57% houses use 31% gas and 11% payments are made, while the connections of the rich are 3%, and they use 17% gas, and their billing is 39%.
He said there was no increase in the connections to Tandoors as it would increase the burden on the public.
The Energy Minister said that CNG costs less than petrol, and therefore price of CNG is raised to 80 percent of the price of petrol.
“Competitive environment has been created for the development of the industry in the country. Similarly, the difference in gas prices in North and South was high which has also been reduced,” the minister continued.
The Caretaker Energy Minister said that the price of gas for the fertilizer sector was not increased in order not to burden the farmers.
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.
He argued 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 to 70% of the population and they are using LPG and wood as fuel,” he added.
The minister said gas prices for the Compressed Natural Gas (CNG) and commercial connections had also been increased. However, he said gas price for the fertilizer and power sectors had not been increased as the hike in the price for this sector directly affects the farmers of the country.
He said the gas price for export-oriented industries had been brought to the level of regional countries, adding a uniformed 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 industrial sector has also been narrowed” he added. However, he said, that the gas rate had been increased for non-export industries.
Responding to a question, he said there was no plan to lift ban on new gas connections due to non-availability of gas.
“Sooner or later we will have to shift to LPG due to non-availability of natural gas in the country [as existing reserves are depleting at the rate of around 9% annually,” he added.
He said around the world natural gas was being provided to power sector for the generation of cheaper electricity.
To another question, he said following the increase in gas tariff, there were bright chances of international companies investing in oil and gas exploration activities in Pakistan.
He further stated it was unfortunate for the last many years no exploration policy framework had been made. “We are working on exploration policy framework” he added.
Responding to a question with regard to control of LPG price, the minister said the government was working with Oil and Gas Regulatory Authority (OGRA) on this issue.
To a query about gas supply situation during the peak winter season (November-February), he said gas supply to domestic consumers would be available for eight hours like the previous year.
The Energy Minister said due to circular debt and revolving loans, the payments were not being made to many companies which compelled them to windup their business in the country.
He brushed aside the impression that new gas tariff would primarily benefit the wealthy segments of society, emphasizing the broader impact on various sectors.
