ISLAMABAD: The Economic Coordination Committee (ECC) has approved an increase in the price of natural gas for the power industry, effective from July 1, 2024, to meet the conditions of the International Monetary Fund (IMF) for a new programme.
The Petroleum Division submitted the gas pricing summary at the ECC meeting, chaired by the Finance Minister on Sunday. The Oil and Gas Regulatory Authority (OGRA) had set the estimated revenue requirements for FY 2024-25, with SNGPL requiring Rs607 billion and SSGCL needing Rs289 billion, totaling Rs897 billion.
The federal government is required to suggest OGRA on revising category-wise customer gas prices within 40 days of the determination to ensure the revised tariffs are applicable from July 1. The revised OGRA Ordinance mandates that the consumer gas sale prices meet the revenue requirements set by the Authority.
In recent IMF talks, adjusting gas prices by July 1, 2024, and phasing out captive power plants by January 2025 were set as major conditions. The captive power industry, substantial consumers of gas and RLNG, provides extra revenues for cross-subsidization in the domestic sector.
The IMF memorandum includes plans to align captive power plants’ gas tariffs with RLNG tariffs. Currently, captive power plants provide different proportions of indigenous gas and RLNG on SSGCL and SNGPL networks.
To meet IMF conditions, the Petroleum Division proposed raising the gas tariff for the captive power industry from Rs2,750/MMBtu to Rs3,000/MMBtu, collecting an estimated surplus revenue of Rs. 92 billion annually. However, the phasing out of captive power units by January 2025 is likely to create a shortfall of Rs47 billion, requiring further price revisions from January 1, 2025.
