Ministries oppose gas price increase
ISLAMABAD: The gas price increase has been opposed in its current form by several line ministries, citing concerns that it will disproportionately impact the industrial sector, lead to higher electricity prices, and result in cross-subsidization of the fertiliser industry at the expense of other industries.
The concerns raised by ministries representing various sectors have also been made part of the summary which came under consideration of the Economic Coordination Committee (ECC) of the Cabinet.
The Power Division stated that the proposed hike in gas rates for the power sector—from Rs 1,050/mmBtu to Rs 1,313/mmBtu—will increase electricity generation costs for thermal plants using domestic gas by approximately Rs 10 billion in FY 2025–26. This increase is expected to result in higher Fuel Cost Adjustments (FCA), ultimately passed on to consumers, raising electricity tariffs by around Rs 0.10 per unit.
Pakistan now gas-surplus amid demand collapse, says Motiwala
The Power Division further noted that rising generation costs could make electricity less affordable for all consumer categories. This may reduce the overall sales of Discos, with a knock-on effect on capacity payments in the power sector.
Additionally, the price hike would reduce the merit order ranking of gas-based power plants, pushing them below imported fuel plants such as those using coal. This shift could result in an estimated foreign exchange exposure of around $140 million due to increased coal imports. The Division cautioned that such a change in the energy mix must be carefully considered due to its implications for energy affordability, the balance of payments, and broader macroeconomic stability.
In a scenario where imported fuel-based plants replace gas plants, the Sui gas companies could face estimated revenue losses of Rs 39 billion, depending on global fuel price trends.
The Power Division also addressed a reported Rs 41 billion revenue shortfall claimed by SNGPL, attributed to RLNG diversion. However, it emphasized that the cost of RLNG diversion is already covered under Gas Supply Agreements (GSAs) with government power plants and reimbursed through CPPA-G via NPD payments. Therefore, it recommended that only genuinely unrecovered amounts, if any, be allowed in SNGPL's accounts.
The Ministry of Industries and Production (MoI&P) expressed concern that increasing gas prices for the general industry—from Rs 2,150 to Rs 2,350/mmBtu—will escalate the cost of doing business, hinder industrial growth, and damage export competitiveness. The Ministry warned this would further disadvantage Pakistani industries compared to regional competitors.
MoI&P highlighted that the new National Tariff Policy 2025–30 aims to reduce Customs duties on finished goods and decrease input costs for locally manufactured products. These objectives would be undermined if the cost of industrial inputs like gas continues to rise. The Ministry recommended that the Petroleum Division reconsider its decision and refrain from increasing gas prices for the general industry.
The Finance Ministry also raised objections, noting that while gas prices for the fertiliser sector have been kept unchanged, the process industry will face a Rs 200/mmBtu increase. It argued this effectively results in the process industry cross-subsidising the fertiliser sector. The Petroleum Division was urged to consider full cost recovery from the fertiliser sector to alleviate the subsidy burden on the rest of the industry.
Furthermore, the Finance Ministry criticized the current practice of recovering Unaccounted-for Gas (UFG) losses through consumer pricing, which it said discourages utilities from improving operational efficiency. It recommended that the Petroleum Division brief the ECC on planned UFG reduction measures and their financial implications.
The ministry also requested the Petroleum Division to inform the ECC whether lifting the moratorium on new gas connections could help address surplus RLNG issues and the curtailment of indigenous gas production.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
8 hours ago
- Business Recorder
Domestic consumers: Pakistan govt hikes gas fixed charges
ISLAMABAD: Federal government has approved increase in the fixed charges for domestic gas consumers of both gas companies (SNGPL/ SSGC) by Rs150 (protected) and Rs400 (non-protected) effective from July 1, 2025. With an average 10 percent tariff hike will applicable to the power sector, bulk consumers, and general industry (process). The Economic Coordination Committee (ECC), on Friday, approved the summary submitted by the Petroleum Division, seeking approval for a revised natural gas pricing structure for the fiscal year 2025–26. The ECC considered the proposed adjustments in energy sector tariffs and decided to maintain gas prices to protect household consumers with only fixed charges re-adjusted in domestic sector to recover the asset costs. It also allowed price of gas for bulk consumers, power plants operating on natural gas and industry to be increased by an average value of around 10 percent. SNGPL, SSGC: Weighted average price of imported RLNG cut slightly The committee approved a raise in gas tariff to bulk consumers from Rs2,900 per mmbtu to Rs3,075 per mmbtu. For power sector tariff has revised from Rs1,050 per mmbtu to Rs1,313 per mmbtu. For general industry (process) tariff was revised from Rs2,150 to Rs2,350 per mmbtu. The minimum bill for protected and non-protected consumer will be calculated at the first tariff slab of each category. Power tariff would also be stand revised for PPL's gas supply to Guddu, and Mari Energies' gas supply to Foundation Power. According to the summary submitted for consideration of ECC, it argues that only room to revise prices is available in the domestic sector slabs, wherein, a huge cross-subsidy is involved which is estimated at Rs168 billion per annum at current prices. Government is already engaged with IMF under the resilience sustainability facility to replace cross-subsidies with direct or budgeted subsides in commensuration with income levels of the domestic consumers under the BISP. As per the reform measure, the framework for replacing the cross-subsidy would be developed by June 2026 following the model being pursued by Power Division which is expected to be rolled out in 2027. Petroleum Division worked out option whereby revision in the gas tariff, as well as, fixed charge has been proposed; however, in order to lower the impact of price revision in domestic sector, the revision in bulk domestic, industry (process) and power sector, which is unchanged since February 2023, has also been approved. The revisions in gas tariff are estimated to meet Rs41 billion revenue deficit of SNGPL and it would also generate Rs31 billion surplus for SSGC which would be utilised to meet prior revenue shortfall of SSGC which are around Rs565 billion. Copyright Business Recorder, 2025
Express Tribune
11 hours ago
- Express Tribune
Fixed gas charges jacked up by 50%
Listen to article The government on Friday increased the fixed charges on gas bills by 50% and also jacked up gas tariffs for non-residential consumers but deferred a decision on import of up to 500,000 metric tons of sugar due to a disagreement over huge subsidies. The Economic Coordination Committee (ECC) of the cabinet, which took the decisions, also approved Rs2.6 trillion in supplementary grants for repayments of the domestic and foreign debts in the current fiscal year, ending on Monday. The ECC's meeting, which was held just three days before the start of the new fiscal year, underscores challenges that the Finance Ministry will keep facing in the new fiscal year 2025-26 due to competing demands for unallocated subsidies. "The ECC proposed adjustments in energy sector tariffs and decided to maintain gas prices to protect household consumers with only fixed charges re-adjusted in the domestic sector to recover the asset costs", according to a statement issued by the Finance Ministry after the ECC meeting. It added that the ECC allowed the price of gas for bulk consumers, power plants operating on natural gas and industry to be increased by an average value of around 10%. However, where the ECC did not change gas prices for residential consumers it significantly increased the fixed charges on the residential consumers by 50%. For the protected category of domestic consumers the fixed charges were increased by Rs200 to Rs600. In the non-protected category, for monthly consumption of up to 1.5 hm3, the fixed charges were increased from Rs1,000 to Rs1,500. Likewise, the fixed charges for consumption of over 2 hm3 were increased from Rs2,000 to Rs3,000. The prices were changed to meet a condition of the International Monetary Fund to biannually adjust the gas prices. The Oil & Gas Regulatory Authority last month determined the Estimated Revenue Requirements (ERR) for FY 2025-26 for both SNGPL and SSGCL. According to the determinations, SNGPL requires revenues of Rs534.5 billion and SSGCL requires revenues of Rs354.2 billion to sail through the FY 2025-26 respectively. The cumulative revenue requirements of both the Sui companies are Rs888.6 billion for the FY 2025-26. The law mandates the federal government to ensure that the consumer gas sale prices should not be less than the revenue requirement determined by the Authority. At the current notified consumer gas sale prices effective February 01, 2025 the estimated revenues of both Sui companies by end FY 2025-26 are Rs847.714 billion. The ECC approved to increase the gas prices for bulk consumers by 9% to Rs3160 per mmbtu. It jacked up the rates for power plants by 17% to Rs1230 and 7% for the industrial gas connections to Rs2300 per mmbtu. Some of the members of the ECC criticized giving guaranteed 24% return on assets to Sui companies, which discourage efforts to improve efficiency by reducing line losses. Sugar Import The ECC could not take a decision on a proposal of up to 500,000 sugar imports to meet the local shortage in future, caused by the export of 765,000 metric tons sugar by the government of Prime Minister Shehbaz Sharif. The ECC was told that inclusive of all taxes and duties, the imported sugar would cost Rs245 per kg, which is even higher than Rs190 local price. A member of the ECC said that the government has to give Rs85 per kg subsidy, which would require Rs42.5 billion supplementary grant in the next fiscal year. However, during the meeting the Secretary Finance said that he would neither provide subsidies nor he would seek the permission of the IMF for allowing such subsidies or waive off the taxes and duties at the import stage. Without duty and taxes, the import price at the port is Rs153 per kg. Deputy Prime Minister Ishaq Dar led committee has determined the need for the import of 750,000 metric tons of sugar due to anticipated shortages in the month of October and onwards. The ECC members urged to free the sugar market and maintain only strategic reserves of about 500,000 metric tons. An official handout of the Finance Ministry stated that the ECC considered a proposal brought on by the Ministry of National Food Security and Research for import of sugar to stabilize the sugar prices. The ECC approved the proposal of the Ministry for constitution of a 10-member steering committee led by Federal Minister for MNFSR and including Federal Minister for Commerce, SAPM to Ministry of Foreign Affairs, Secretary Finance Division, Chairman FBR and others to come back to the ECC with their recommendations on the matter, it added. Banks' subsidies The Finance Ministry stated that the ECC also discussed a summary by the Finance Division regarding changes in the home remittances incentive schemes. It said that the ECC tasked the State Bank of Pakistan and the Finance Division to propose and present a proper plan by 31st July to ECC, ensuring impact analysis and a roadmap for a properly-managed transition. The ECC was informed that the banks have demanded Rs200 billion claims on account of subsidies under the Pakistan Remittances Initiatives. The Finance Ministry has already discontinued the subsidy for the next fiscal year. The central bank representative told the ECC that the SBP cannot give any subsidy due to restrictions imposed by the IMF. Some of the members of the ECC objected to giving up to Rs6 per dollar subsidy, which was not benefiting the remitters and instead the money was going in the pockets of the commercial banks and the exchange companies. They urged instead to facilitate the manufacturing sector. Other decisions The ECC approved another Rs15.8 billion supplementary grant for the Ministry of Defence to cover the shortfall in admissible pay and allowances, in employees-related and non-employees related expenditures and clear the outstanding dues as part of the PM's Package for the martyrs of the recent Pak-India war. It approved another Rs5.5 billion supplementary grant for Strategic Plans Divisions as rupee cover for Pakistan Space & Upper Atmosphere Research Commission (SUPARCO) during CFY 2024-25. The Cabinet body also considered a summary by the Finance Division for the launch of a risk coverage scheme for small farmers and under-served areas, and accorded in-principle approval to the proposal with instructions for further fine-tuning and incorporating in it additional safeguards before its planned launch on 14th August 2025. The ECC was told that the scheme would likely bring 750,000 new agricultural borrowers into the formal financial system and generate an incremental credit portfolio of Rs300 billion during its disbursement tenure of 3 years from FY 26 to FY 28. The budgetary requirement for meeting risk coverage and operational cost of the banks is estimated to be Rs37.5 billion, spread over five years.
Business Recorder
12 hours ago
- Business Recorder
HCSTSI team participates in ‘Financing Agreement Signing' ceremony
HYDERABAD: A high-level delegation of Hyderabad Chamber of Small Traders & Small Industry (HCSTSI) participated in the 'Financing Agreement Signing Ceremony' and the event organized in connection with the Global Micro, Small and Medium Enterprises Day (MSMEs Day). The delegation was led by Acting President Ahmed Idrees Chohan, who was invited as the Chief Guest at the prestigious event. The program was organized by the Sindh Agricultural and Forestry Workers Coordinating Organization (SAFWCO) under the Growth for Rural Advancement and Sustainable Progress (GRASP) project, aimed at supporting and financing MSMEs. On this occasion, selected SMEs were awarded grants of Rs. 10 million and Rs. 20 million. While addressing the ceremony, Ahmed Idrees Chohan highlighted that the Global MSMEs Day, observed annually on June 27 under the United Nations, serves as a reminder that small and medium enterprises are the backbone of any economy. In a developing country like Pakistan, MSMEs are key drivers of employment, innovation and economic sustainability. He appreciated the efforts of SAFWCO, GRASP, European Union (EU), International Trade Centre (ITC), Pakistan Poverty Alleviation Fund (PPAF) and other partner institutions for making financial support for SMEs a reality and celebrating the day with full spirit. Copyright Business Recorder, 2025
