In an effort to cushion the impact of a potential gas tariff hike, the caretaker government is devising a plan to introduce a special gas tariff for low-income households in Balochistan, sources reported to The Express Tribune on Monday. This initiative comes as winter approaches, bringing with it the harsh cold waves that make low-income consumers in Balochistan particularly vulnerable.
The government has engaged with the management of the Sui Southern Gas Company Limited (SSGCL), which operates in the Balochistan province, to discuss the proposed measure. The cost of implementing this special tariff is estimated at Rs10 billion annually, a substantial financial commitment. Nevertheless, the government is determined to shield low-income consumers from the potential shock of rising gas prices.
Sources further revealed that an alternative proposal is under consideration, wherein direct subsidies would be provided to low-income gas consumers through the Banazir Income Support Programme (BISP).
Presently, the government employs cross-subsidies to support low-income gas consumers. However, with mounting pressure from the International Monetary Fund (IMF) to raise gas rates, officials from the petroleum and finance departments, along with the Oil and Gas Regulatory Authority (Ogra), have convened to finalize a gas price increase ranging from 45% to 50%.
The IMF’s insistence on implementing the gas price hike from July 1, 2023, as determined by Ogra on June 2, 2023, has placed added pressure on the government. Ogra had announced a 50% increase for Sui Northern Gas Pipeline Limited (SNGPL) consumers and a 45% increase for SSGCL consumers.
The cumulative shortfall of Rs657.766 billion for both gas companies, with Rs560.378 billion attributed to SNGPL and Rs97.388 billion to SSGCL, has been a significant concern. Delays in revising gas prices from July 1, 2023, have added Rs500 billion to the circular debt in the gas sector.
The disparity in gas prices between urban and rural areas has also been acknowledged, with individuals in remote regions compelled to rely on costly gas cylinders while urban residents with piped gas connections pay considerably lower prices.
To address these challenges, the government is exploring strategies such as optimizing production from depleting gas fields, reviving closed wells with advanced technologies, and boosting oil and gas exploration and production activities nationwide. Additionally, plans to unbundle gas companies, consolidate gas transmission, and create smaller utilities for increased efficiency and reduced losses are being developed.
Managing the circular debt remains a major challenge, and the government is exploring options for book adjustments between different companies to reduce it. The liquefied natural gas (LNG) sector has been a significant contributor to the circular debt, stemming from previous policies that directed expensive LNG to domestic consumers during the winter season.
Efforts are underway to implement the weighted average cost of gas bill, which could help reduce the circular debt and recover the full cost of LNG. The challenge lies in finding a balance that satisfies the needs and concerns of various stakeholders, including gas-producing provinces and consumers across Pakistan.
