Cash-strapped govt raises gas prices by up to 143%

–Rates for consumers belonging to lower and middle classes increased by 10-20%, up to 143% for ‘upper class’

–Petroleum minister says progressive tax on gas consumption will pass on burden to heavy users of gas, generate Rs94bn

–Fertiliser plants slapped with 40% increase, flat 10% tax imposed on LPG

ISLAMABAD: The Economic Coordination Committee (ECC) of the federal cabinet on Monday approved an increase of 10 to 143 per cent in prices for domestic gas consumers, categorising them into seven slabs instead of the pre-existing three to spread the impact of the price hike progressively.

In view of Finance Minister Asad Umar’s directives to not burden masses with the price hike, a larger increase in tariffs was placed on the higher tariff slabs.

The approval comes in the backdrop of a shortage of funds for the government to run its daily affairs. The move is expected to generate an additional Rs 94 billion from the end users of gas and will come into effect from October 1.

Addressing media personnel after the ECC meeting, Petroleum Minister Ghulam Sarwar said that the increase in tariffs aims at putting the burden on the rich instead of the poor.

“We have only approved an increase of Rs 23 in the total gas bill for the common man,” he said while addressing a joint press conference with Information Minister Fawad Chaudhry.

Sarwar further announced that tariff slabs for the commodity have also been increased from three in the past to seven now. The first three slabs, the minister explained, include consumers from lower and middle classes.

NEW TARIFFS:

According to the new tariff, users who consume up to 50 cubic metres of gas per month will fall in the first slab and will experience a nearly 10% increase in prices. “The bill for a customer who pays Rs252 per month on average will now rise to Rs275 in this category,” the minister said.

The second slab will comprise users who consume up to 100 cubic metres of gas per month and will witness an increase of 15% in gas prices. Those consuming up to 200 cubic metres of gas will fall in the third slab and will experience a 19% increase in their gas bills.

These three categories will collectively bear an increase of 10-20% in gas prices in form of a few rupees, Sarwar said.

The price hike for the upper class, comprising consumers who use up to 300 cubic metres of gas per month, will be 25%, while those who use up to 400 cubic metres of gas per month will have to bear a 30% increase in gas prices.

Those consuming over 400 cubic metres of gas per month will face a 143% increase in gas charges, informed the minister.

The petroleum minister went on to say that only 23% of the country’s population is using gas network.

“Both Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) were in profit when the Pakistan Muslim League-Nawaz (PML-N) government came into power in 2013. Now both the companies are operating under a deficit of Rs 152 billion rupees,” the petroleum minister said.

“Gas was previously being purchased at higher prices and sold cheap,” Sarwar said.

CNG PRICES:

The petroleum minister further said that prices for Compressed Natural Gas (CNG) consumers in Sindh and Khyber Pakhtunkhwa have been increased by 40% from Rs700/mmbtu to Rs980/mmbtu as both the provinces had been enjoying a lower rate earlier because they produced more gas.

Likewise, the ECC has approved 40% hike in gas prices for those fertiliser plants that use gas as fuel. After the increase in gas prices, the price of per bag of urea fertilizer will go up by Rs 128.

The ECC also approved a 57% increase in gas prices for the commercial sector, a 40% increase for general industry, a 57% hike for the power sector, and a 30% increase for the cement sector.

TAXES ON LPG:

Meanwhile, the ECC has also decided to lift all taxes imposed on Liquefied Petroleum Gas (LPG) and levy a flat 10% goods and services tax on it instead. The minister said that the price of an LPG cylinder, which was currently over Rs 1,600, will decrease to Rs 1,400.

Sarwar said that the move will benefit the poor since they’re the ones who use LPG cylinders.

Moreover, Rs 23 billion for new gas schemes initiated earlier to appease voters in general elections 2018 have also been approved to be collected from consumers.

Gas prices for export industries, including jute, carpet, textile, sports goods, leather and surgical goods, have not been increased.

In addition, the subsidised Liquefied Natural Gas (LNG) imported by the private sector will be provided to the zero-rated industries, the minister said. This will help the industries compete internationally, he added.

The minister also announced that the government will announce subsidies amounting to billions of rupees on LNG. “We will be providing relief to our export industries,” he added.

He said that the government has also decided to provide subsidies to domestic industries like fertilisers, etc.

Earlier on Sept 10, the ECC had decided against an immediate increase in gas prices and left the final decision to Prime Minister Imran Khan.

On Sept 4, the prime minister had given the Petroleum Division his go-ahead to raise gas price across the country.