Minister justifies, PPP lambasts hike in gas prices
• Caretakers say adjustments target wealthier consumers, protected slabs to see minimal change
• Sherry questions unprecedented tariff increase amid high inflation, insists key decisions should be left to elected govts
ISLAMABAD: The gas price hike would not affect about 60 per cent of residential consumers using the piped gas supply, Caretaker Petroleum Minister Muhammad Ali said on Tuesday, but added in the same breath that their fixed charges had risen from Rs10 to Rs400 per month.
His comments came in the wake of the Economic Coordination Committee’s (ECC) decision on Monday to approve 193pc hike in gas rates and 3,900pc increase in fixed gas charges.
Mr Ali, who was speaking at a news conference alongside Caretaker Information Minister Murtaza Solangi, explained that these adjustments were designed to ensure that the bills for the majority (57pc) of residential consumers remain under Rs1,300 per month, a figure considerably less than the average Rs4,000 monthly expense for LPG in many rural areas.
He said that beyond these protected consumers, the gas tariff had been raised progressively in line with income levels and increasing consumption patterns in a manner that the rich would pay more.
Similarly, he said, the roti tandoors would continue to get gas at previous rates, and therefore there would be no justification for increasing roti prices.
He said had the gas price not been raised, the country would have been left with no money to finance huge circular debts and fiscal deficits.
The gas rates had not been increased as required over the past decade, Mr Ali said, stressing that the pricing disparity between the two gas distribution companies had constantly grown from Rs18 billion in the 2013-14 fiscal year to Rs176bn in 2017-18 and then to Rs879bn in 2022-23.
Therefore, the price increase was made to cover the revenue requirement of Rs916bn for the current fiscal year on account of Rs697bn for natural gas and Rs210bn worth of regasified LNG diversion to the residential sector.
He also emphasised the urgency of these adjustments, pointing to the ballooning circular debt in the gas sector, now at Rs2.1 trillion and estimated to hit Rs2.48tr by June next year.
This debt, he said, had discouraged foreign exploration and production companies, with many exiting the market, except for four.
Such departures, he said, have led to a decrease in exploration activities, a surge in the need for pricier imported fuels, and consequently, a rise in inflation, which jumped from 13pc in June 2022 to 27pc in June 2023.
As for the substantial increase in fixed charges for the 57pc of domestic gas connections that fall in the protected category, the minister said: “A fixed bill of Rs400 per month is being introduced, which is a negligible amount.” He stressed that the country could not afford to give a scarce resource at throwaway prices.
He said gas prices for almost 85pc of fertiliser plants had been kept in line with Mari field’s cost of Rs580 per unit, meaning a minimal hike of Rs70 over the previous rate.
Besides, the rates for industries had been raised to reduce the distortion between the country’s north and south regions and create a level playing field for everyone by offering gas at the same price to existing and new industries.
‘Leave it to elected ones’
Meanwhile, the PPP on Tuesday lambasted the caretaker government for increasing gas prices at a time when the nation is grappling with soaring inflation.
“Given the current level of inflation in the country, the caretaker government should not have burdened the people with an unprecedented gas price hike ahead of winter,” PPP Vice President Senator Sherry Rehman said in a statement.
“The fixed charges have surged from Rs10 to Rs400, marking a whopping 3,900pc increase per month for protected consumer slabs,” she said. “Furthermore, gas prices for domestic consumers have also witnessed a sharp increase of 172pc.”
She said it would be more appropriate for such decisions “to be deferred to the elected government”.
Published in Dawn, November 1st, 2023