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IMF condition: ECC set to green light gas tariff hike today

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1 year ago

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  • Tariff may go up by 173% for non-protected domestic consumers. 
  • Petroleum Division to push for implementation of hike from Oct 1. 
  • Circular debt to increase by Rs15bn if hike implemented from today.

ISLAMABAD: The Economic Coordination Committee (ECC) will meet today (Monday) to green-light the plan to hike the gas tariff, a key part of the International Monetary Fund (IMF) conditions, including a zero hike in the gas circular debt for the ongoing financial year 2023-24, reported The News.

The government is likely to increase the local gas tariff up to 173% for non-protected domestic consumers, 136.4% for commercial, 86.4% for export and 117% for the non-export industry.

Since there is no budgeted subsidy for even domestic, commercial, and industrial sectors, the high-end consumers will provide cross-subsidies to low-end consumers.

The government’s failure to hike the gas prices from July 1 has forced it to incur a loss of Rs50 billion during the July-September in the gas sector. But the losses will be bridged when the government moves ahead with the increase in the gas tariff which would give enough monetary space to recover with the loss.

As per the publication, the IMF has been taken onboard on this point. It has been informed that the gas prices would be increased in such a manner that it would not increase the circular debt during this financial year, which right now stands at Rs2.9 trillion.

However, now the Petroleum Division will try to ensure that the gas tariff hike is implemented from October 1. If the government decides to implement the hike from today onwards then the circular debt would increase by Rs15 billion.

But there would be no increase in the gas tariff from January 1, 2024, a further gas tariff increase would be implemented as under the law, the review of gas prices is carried out bi-annually.

The cement sector will have to purchase the gas 193.3% higher than the current cost, making it the biggest bearer of the brunt, from 1,500 per MMBtu to Rs4,400 per MMBtu.

The CNG sector, will face the second-highest increase in gas tariff by 143.8% from Rs1,805 per MMBtu to Rs4,400.

If the hike is approved, then it means that cement prices will skyrocket and CNG will be much more expensive than petrol.

The government, however, does not plan on increasing the tariff for tandoors which would ensure that roti prices remain stable.

The summary prepared by the petroleum ministry that is to be pitched today in the ECC meeting shows it has not spared the four protected domestic consumer categories as ostensibly it has not proposed to increase their gas tariffs but hiked their monthly fixed charges from Rs10 to Rs400 per month.

More importantly, the Petroleum Division has also proposed to escalate the per month fixed charges for the first 4 non-protected domestic consumers by 117.4% to Rs1,000 from Rs460 per month from their gas tariffs increase by 50-150%. Also, to be increased are per month fixed charges for the remaining 4 non-protected domestic consumers, by 334.78%, to Rs2,000 from Rs460 per month part, increasing their gas tariff by 100%-173%.

The summary states that SNGPL will now offer a blend of natural gas and RLNG in a 20:80 ratio to non-export industry out of the estimated volumes for industrial consumers, both process and captive, as per petitions filed by SNGPL to OGRA for revenue determination.

The blend offered by the Sui companies shall be reviewed every quarter based on the availability of natural gas and RLNG. And SSGC shall offer a blend of NG and RLNG of 90:10 out of the estimated volumes for industrial consumers, both process and captive, as per petitions filed by SSGC to OGRA for revenue determination.

Coming to the export industry, the summary says that currently, there is a wide price disparity between the industry operating on SSGCL and SNGPL networks. Industry in the north (operating on the SNGPL network) consumes a 50:50 blend of indigenous and RLNG for 9 months (Mar to Nov) and 100% RLNG for 3 months (Dec-Feb), averaging to the current tariff of $9.6/MMBtu (Rs2,790) over the year.

On the other hand, process connections of the industry in the south (operating on SSGCL) are being charged at Rs1,100/MMBtu. SSGC has recently started a supply of blend in the proportion of 75:25 for captive use of gas, which approximates $5.9/MMBtu (Rs1,710).

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The economic outlook for Pakistan. Report: The Economy Will Continue Its Sustainable Recovery

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14 hours ago

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Stability in the external and fiscal sectors, along with large financial inflows, have helped Pakistan show a steady recovery in the first quarter of FY2024–25.

The October economic outlook from the Finance Ministry emphasizes encouraging developments, such as the 1.03 billion dollar first tranche from the IMF’s extended financial facility, which improves macroeconomic stability.

A 3.7 percent increase in total fertilizer production and a 115.9 percent increase in imports of agricultural gear are significant achievements.

In August 2024, large-scale manufacturing grew 4.7 percent month over month, even if it decreased by 0.2 percent in July and August of the same year.

September 2024 had a 44-month low of 6.9 percent consumer price index inflation, down from 31.4 percent the year before.

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The FBR prohibits additional extensions to the income tax return filing deadline.

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15 hours ago

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The FBR has rejected a second extension of the deadline, which is due today (October 31), after two extensions were granted.

Over 5.01 million returns have been filed thus far, and the tax returns process has generated over Rs125 billion in revenue, according to FBR officials.

Taxpayers have been instructed by the tax authority to submit their returns by midnight tonight. Identification of non-filers or late filers will begin on November 1.

When late filers buy a car or a piece of real estate, they will pay double taxes.

Officials stressed the need for people making Rs 50,000 a month to file income tax reports. Those who don’t comply will be labeled late or non-filers.

According to the body officials, non-filers may have their gas and electricity supplies cut off, have their international travel restrictions revoked, and have their SIM cards on their phones disabled.

The Federal Board of Revenue (FBR) extended the final day for filing income tax returns to October 31 on October 14.

The decision takes bank holidays into account and was made in response to demands from tax bar groups and trade organizations.

The Income Tax Ordinance 2001’s Section 214A extended the deadline, giving taxpayers more time to submit their forms.

A number of trade associations and tax bar associations had previously asked FBR to extend the deadline for filing income tax returns for the fiscal year 2024 from September 30 to October 14.

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Malir Industrial Park is introduced by SIFC.

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2 days ago

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The establishment of “industrial parks” by the Pakistan Economic Zone Development and Management Company and the Special Investment Facilitation Council aims to attract investors and stimulate the economy.

First up is the Malir Industrial Park, which gives companies access to important trade and transportation channels. This park will be different from heavy industry parks in that it will concentrate on small industries and diverse industrial offices. Among Karachi’s industrial zones, it would be noteworthy for providing security and necessary infrastructure.

In order to lower unemployment, the initiative intends to generate more than 200,000 jobs in the first five years. To increase the advantages of the program, the Korangi Association of Trade and Industry will become a member of the Malir Industrial Park Advisory Council.

The park will have easy access to Karachi Port and Jinnah International Airport due to its strategic location at the convergence of key highways, such as the National Highway and Malir Motorway. This would guarantee effective access to both domestic and foreign markets.

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