Since the Oil and Gas Regulatory Authority (OGRA) decided in June to hike gas tariffs, the IMF will likely criticise the Pakistan government’s decision to delay reporting the rise.
The government has no alternative but to increase the gas rate by as much as 50% because of the lender’s imminent assessment under its $3 billion Standby Arrangement for a $1 billion tranche due in November. A National Daily reports that the two gas companies together are short Rs. 657.766 billion. If the rise is not reported, the IMF may bring it up with Pakistan at the upcoming review meetings.
The gas prices rose in past
The gas price for SNGPL users was raised by OGRA by 50 percent (Rs. 415.11 per MMBTU) on June 2, 2023, bringing it to Rs. 1,238.68 per MMBTU. Meanwhile, the gas pricing for SSGCL consumers was raised by the regulator by 45 percent (to Rs. 417.23 per MMBTU) for the upcoming fiscal year of 2023-24.
Sui Northern still has a shortfall of Rs. 560.378 billion for the fiscal year 2022-23, while Sui Southern has a shortfall of Rs. 97.388 billion; together, the two gas companies have a shortfall of Rs. 657.766 billion.
Pakistan has raised prices previously
The previous administration considered multiple gasoline price increase plans aimed at minimising political fallout, all of which would have resulted in lower prices for low-income consumers and higher prices for higher-income consumers. However, the previous administration did not pursue this option, thus the onus for increasing gas prices has been placed on the new caretaker government that has been in place for only a week.
The International Monetary Fund (IMF) has urged the government to develop a plan to erase the Rs 1.7 trillion in oil & gas industry circular debt, of which the gas sector is responsible for repaying Rs 1.3 trillion. By providing additional grants to SNGPL and SSGCL, the federal government might inject roughly Rs. 414 billion into the two companies to cover their debts to gas producers OGDCL, PPL, and GHPL, should such a strategy be adopted and put into action. The same is true for OGDCL and PPL, who want to raise Rs. 56 billion independently through the sale of investment bonds.
OGDCL owes SNGPL and SSGCL around Rs. 225 billion, PPL owes SNGPL and SSGCL approximately Rs. 62 billion, and GHPL owes SNGPL and SSGCL approximately Rs. 127 billion. In return, the government will receive dividend payments of Rs. 475 billion from the three gas producers by June 30, 2022. This amount is based on the companies’ projected retained revenues of over Rs. 1.44 trillion.
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