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PD proposes massive gas price hike across the board

July 07, 2022 (MLN): The Petroleum Division (PD) has reportedly proposed to increase gas prices across the board including fertilizers, cement, export industry and other non-export sectors.

Petroleum Division, after analyzing the categories of gas consumers, their respective consumption during the last financial year, the impact of price changes on different categories of consumers and the need to meet the revenue requirements of gas utility companies, has come up with broad principles/parameters for revision of the category-wise consumer gas sale prices, according to a report by Business Recorder.

For the domestic sector, slab up to 0.4 hm3 is proposed to be merged with slab up to 0.5 hm3 and the new rate for the merged slab is proposed to be Rs173/mmbtu from Rs 121/mmbtu, showing an increase of 43%.

While no new rate has been proposed for the slab up to 1 hm3. It will remain at Rs 300/mmbtu.

The slabs up to 3 hm3 and above represents the affluent consumers that may pay closest to the average cost of RLNG. The proposed rate for up to 3 hm3 will be Rs1,856/mmbtu from the existing Rs738/mmbtu, up by 151% while PD proposed Rs3,712/ mmbtu for the slab above 3 hm3, 154% higher than the old rates of Rs1,460 mmbtu.

The proposed rate for bulk consumers will be Rs928/mmbt from old rate of Rs780/mmbtu.

For commercial consumers, Rs2,321/mmbtu has been proposed, 81% higher than the old rate of Rs1,283/mmbtu. Although, the report said that the alternative fuel for commercial consumers is LPG, which is 4 times the cost of indigenous gas in terms of energy units. The proposed rise in price is still much lower than LPG price (58% of LPG price only).

Under the commercial tandoor, the petroleum division has proposed to consolidate the slabs as 95% consumers fall in the last slab of the existing structure, it said. The proposed rate for the slab above 3 hm3 will be Rs928/mmbtu from the existing Rs700mmbtu, as per data shared by Ismail Iqbal Securities on Twitter.

The proposed rate for general industry (non-export) will be Rs 1,650/mmbtu from Rs 1,054/ mmbtu, whereas proposed rates for export-oriented will be Rs 1,450/mmbtu from Rs 819/mmbtu.

The existing price for the textile industry is S6.5/mmbtu which has been proposed to be revised to S9/mmbtu, up by 38%.  

The price of fertilizer feed did not witness much increase in the past because of its ultimate impact on farmers. Now, it has been proposed to Rs430.mmbtu, an increase of 42% from the existing rates. Similarly, the price for fuel gas use has been proposed to Rs1,857/mmbtu.

The most efficient plants with over 60% efficiency are operating on imported gas whereas scarce natural gas is being provided at a much lower cost to the less efficient power plant. In order to encourage efficiency in the merit order while protecting the pass-on impact to consumers, the existing tariff has been proposed to be equated with the Average Prescribed Price, the report by Brecorder said.

The new proposed rates for IPPs and power stations (WAPDA & KE) are Rs928/mmbtu from Rs857/mmbtul; Liberty power-proposed rate at Rs2,406/mmbtu from Rs1,881/mmbtu.

For CNG region I & II and the cement sector, the prices have been proposed to be set at Rs2,321/mmbtu.

As per Sherman securities research, gas circular debt may have increased by Rs200-250bn in FY22. Having said that, it believes that the hike in gas prices would contain the rise in quantum of circular debt by 45% in FY23 to Rs110-130bn.

Copyright Mettis Link News


Posted on: 2022-07-07T15:39:44+05:00


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