The caretaker government is poised to present a plan to the Economic Coordination Committee (ECC) today, in accordance with IMF directives, aiming to increase gas prices further. The proposal follows the recent recommendation by the Oil and Gas Regulatory Authority (OGRA) for a 23.16% average hike in gas prices effective from January 1, 2024.
Under the proposed plan by the petroleum division, the price of Compressed Natural Gas (CNG) may also rise to Rs3800 per mmBtu from the current Rs3600 per mmBtu, alongside hikes in gas sale prices for other consumer categories.
A senior official stated, “Various options for increasing gas prices have been considered, and once consensus is reached among key stakeholders, including the Finance Ministry, the chosen option will be presented at today’s ECC meeting.”
The recent OGRA decision marked the second gas price hike in the fiscal year 2023-24, aimed at addressing a Rs100 billion shortfall until June 30, 2024. The caretaker setup is mandated to implement this decision under IMF directives to achieve the Rs100 billion target by February 15.
Earlier proposals to increase fixed charges for all gas categories to generate additional revenue faced opposition from stakeholders. OGRA stressed passing on the average increase in gas prices to all consumer categories rather than relying solely on fixed charges.
With the previous gas price hike in November 2023, revenue targets were not met due to lower gas production, resulting in a Rs98 billion shortfall. To address this deficit, an average increase of 23.16% in gas prices is proposed.
Despite dissenting views from some stakeholders opposing gas price hikes, the IMF’s mandate for biannual fluctuations in gas tariffs remains a priority for the government to manage circular debt and reduce its stockpile.
The outcome of the ECC meeting will determine the course of action, but the government is obligated to enforce the OGRA-determined increase by February 15, 2024.
