Islamabad, To address the efficient use of the dwindling natural gas resource, and considering the aspects of sustainability and affordability, the Federal Government, after consultation with the OGRA, approved an increase in the natural gas prices for distinct consumer categories. This decision becomes effective from the 1st of November, 2023. The decision came on the heels of a meeting held by the Economic Coordination Committee (ECC) of the Cabinet on October 23, 2023, where they reviewed a summary presented by the Petroleum Division, leading to the approval of the revised natural gas prices on October 30, 2023.
According to Press Information Department, the rapid depletion of natural gas reserves at an alarming rate of 5-7% annually is pushing the national gas basket to lean on the more expensive imported fuel, LNG. Added to this is the significant devaluation of the rupee against the dollar and the overarching general inflation. These factors together have intensified the costs related to gas exploration, production, distribution, and transmission. The prior governments’ decision to retain control over pricing of this scarce resource rather than empowering the regulator with strong internal controls led to a PKR 2.1 trillion circular debt. The pricing decision has been complex for the current caretaker government due to the clash between affordability and sustainability.
Under the ongoing IMF program, the country has seen a cessation of all subsidies, with the last price hike taking effect in January 2023 – the sole increase in the previous 2.5 years. If the caretaker government had refrained from hiking the prices as recommended by OGRA, the circular debt would have further increased by an estimated PKR 400 billion.
In this new pricing structure, the objectives are clear: ensuring sustainability for the supply chain to prevent further circular debt, devising a practical approach to affordability especially for protected consumers, and optimizing accessibility to gas for efficient users. Presently, only 30% of Pakistan’s households utilize piped gas, with the rest depending on LPG, biomass, wood, and other alternatives. The pricing changes ensure that 57% of domestic gas connections, which fall under the protected category, will experience no price increase. The new fixed monthly charge introduced is Rs.400, ensuring that the monthly bill for the protected class will not exceed Rs.900 for consumption of 0.9 hm3. Tariffs for unprotected categories will rise progressively, with higher-income households facing steeper tariffs.
Furthermore, Roti tandoors will continue to receive gas at the current rate, given the importance of “Roti” as a primary necessity. Fertilizer prices have been adjusted to be consistent with the cost of gas from the Mari gas field, ensuring no added burden to farmers and guaranteeing food security. The Petroleum Division, after consultation with stakeholders, has also introduced a Regionally Competitive Energy Tariff (RCET) with the goal of balancing gas prices between the North and South regions of the country.
The approved new prices for various categories of Domestic (Residential) Consumers are outlined in a tabulated format, with rates for consumption slabs ranging from Rs. 121/mmbtu to Rs. 4,000/mmbtu. Other categories, including Commercial, Power, and Industry, have also witnessed price adjustments, with prices ranging from Rs. 200/mmbtu for Fertilizer Feed to Rs. 4,400/mmbtu for the Cement sector.