Home TRENDING GOVERNMENT YIELDS TO IMF, MORE THEN DOUBLING GAS PRICES

GOVERNMENT YIELDS TO IMF, MORE THEN DOUBLING GAS PRICES

The government falls in to the demands of the IMF and more than doubles gas prices.

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The government falls in to the demands of the IMF and more than doubles gas prices.
Price hikes of up to 113 percent for natural gas have been given the go-ahead.

ISLAMABAD: To resurrect the International Monetary Fund (IMF) programme, the government on Monday approved an increase in natural gas prices that could go up to 113% in order to recover Rs310 billion from the majority of consumers in six months. This will cost the average citizen at least Rs736 billion more in taxes and energy costs.

Although the government began executing the IMF’s requirements one at a time to resurrect the programme, it has not yet demonstrated a readiness to lower the size of the cabinet or levy taxes on both stock market participants and dealers.

The Economic Coordination Committee of the Cabinet (ECC) made the decision, which transferred the maximum burden of 113% on domestic consumers who had monthly consumption of more than four cubic metres.

In addition to “optimising” the previous slab benefit, prices for domestic consumers had been raised by 8.5% to 113%.

The details revealed that the gas prices had climbed from 10.4% to 105% for general industry, commercial gas stations, power plants, cement plants, fertiliser plants, exporters, and CNG stations.

The increase was required to keep both gas distribution businesses from going out of business because they had already had a Rs577 billion revenue shortfall since 2013.

According to the Ministry of Finance, the Petroleum Division presented tariff suggestions for all consumer groups in accordance with the Revised Estimated Revenue Requirements (RERR) for fiscal year 2022–2023 and laid out a summary on Natural Gas Sale Pricing FY 2022–2023 on the table.

According to the announcement, “the ECC adopted a gas price revision plan for the household, commercial, and power sectors for six months — January to June 2023.”

The administration had already met two previous requirements—increasing gas and electricity prices—that were imposed by the IMF along with other requirements in order to obtain a staff-level agreement.

Details revealed that in just six months, gas consumers would incur an additional cost of Rs310 billion.

In order to raise an additional Rs237 billion until June, the government had already hiked energy tariffs by Rs3.30 to Rs15.52 per unit. By June 2023, an additional burden of Rs189 billion would be imposed on taxpayers in the form of tax increases.

These three measures taken together would make the populace pay an additional Rs736 billion in just six months; the cost was increased as a result of the government’s tardiness in reviving the IMF programme.

Ishaq Dar, the finance minister, began to give in to one demand after another, including allowing the rupee to appreciate to its market value, which was already about Rs100 to the dollar above the level Dar had originally desired four months ago.

On Monday, the government and IMF staff exchanged new positions about the first draught of the Memorandum for Economic and Financial Policies (MEFP).

A new class of protected consumers was created by the government, whose rates were lower than those of unprotected consumers.

The protected consumers would also be required to pay a fixed fee of Rs. 50 per month in addition to the standard gas usage charges.

Consumers who are not protected would be required to pay a fixed monthly fee of Rs 500, not including metre rent.

Under the condition that the federal cabinet approves the decision, it would go into force on January 1.

For household consumers using up to 0.5 cubic metres of gas per month, the ECC allowed a price hike of Rs150 per MMBTU, a 24% increase. Their current price was Rs. 121. Prices had climbed to Rs600 per MMBTU for those consuming up to 1.5 cubic metres of gas, an increase of 8.5%.

Gas prices for household consumers using two cubic metres of gas per month has increased by Rs247 or 45% to Rs800 per MMBTU.

Up to three cubic metres of gas consumers would now pay Rs1,100 per MMBTU, which was up Rs362 or 49% from the previous prices. The price per MMBTU at the time was Rs738, for this category.

Consumers that use more than three cubic metres of gas every month, however, have been subject to a significant burden. Consumers of up to four cubic metres of gas would pay Rs2,000 per MMBTU, an increase of Rs893 or 81% from the current rate of Rs1,107.

Customers who use more than four cubic metres of gas would now pay Rs3,100 instead of Rs1,460, a rise of Rs1,640 or 113%.

The average prescribed price per MMBTU for bulk consumers would be Rs1,600, an increase of Rs820 or 105%.

According to the Petroleum Division, the circular debt for the gas sector climbed from Rs299 billion in June 2018 to Rs1.642 trillion in June 2022. Only 27% of the population had access to piped gas, and the household sector used 47% of the local gas.

The ECC allowed the sale of gas to tandoors at the unchanged rate of Rs697 per MMBTU. Price per MMBTU for business gas connections have increased by 29% to Rs1,650.

K-Electric, Sindh Nooriabad Power, and Engro Powergen’s power plants would be charged at Rs. 1,050, which is higher by Rs. 193 or 22.5%. The price for the liberty electricity would increase by Rs. 1,225 or 104% to Rs. 2,406 per MMBTU.

The general industry’s export-related processing consumers were now being charged Rs. 1,100 per MMBTU, a 34% increase.

The captive power plants with export-related costs had been assessed at Rs1,100 per unit, which was Rs248 (29%) higher.

The general industry would now receive Rs. 1,200, a 10.4% to 14% rise.

The price of gas for cement manufacturers was raised to Rs. 1,500, a rise of Rs. 223 (17.5%). Those for the CNG industry had been approved at Rs 1,805 per MMBTU, a 32% or Rs 434 increase.

The other fertiliser plants would pay Rs510 per MMBTU on their feed, an increase of 69%, while Engro Fertilizer would pay Rs140 per MMBTU on feed, a 20% increase. The price of fertilised fuel gas would increase by Rs477 or 47% to Rs1,500 per MMBTU.

other choices

As part of the G-20 Debt Service Suspension Initiative (DSSI) of 2020, the ECC accepted the $14.5 million debt restructuring agreement with Russia.

To lessen the socioeconomic effects of Covid-19, debt forgiveness for IDA-eligible nations was announced in April 2020.

37 debt rescheduling agreements have already been struck with 15 creditor nations.

The ECC approved a Rs40 billion grant for the program’s beneficiaries to help clear the backlog, bringing the total amount to Rs400 billion.

The additional stipend of Rs833 per month per household for those who are 50 years of age or above would be funded with a sum of Rs12 billion, bringing the total benefit to Rs3,067 per month. Beneficiaries who are under 50 years old will continue to get Rs2,233 per month.

22 billion rupees will be used to pay back the cash aid for flood relief that was delayed. Five billion rupees were awarded for two conditional awards for the health and education of the beneficiaries’ children.

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