Inside Financial Markets

ECC approves 30pc hike in gas tariff

photo illustration of natural gasECC approves 30pc hike in gas tariff

ISLAMABAD: The Economic Coordination Committee of the cabinet approved on Thursday policy guidelines for the Oil and Gas Regulatory Authority (Ogra) for recovery of about Rs69 billion from gas consumers through an average 30 per cent increase in tariff to protect viability of gas companies.

A meeting of the ECC, presided over by Finance Minister Ishaq Dar, also approved continuation of subsidised power tariff for agricultural consumers at Rs10.35 per unit until June 2015, involving an amount of Rs22 billion, and a compensation of Rs5,000 per acre to basmati farmers at a cost of Rs10bn subsidy.

Informed sources said the petroleum ministry had been directed to issue the ECC policy guidelines to Ogra to enable it to complete revised working on gas pricing for implementation from Jan 1.

Also read: Proposal for gas tariff hike rejected

They said the guidelines would enable the gas companies to recover from honest consumers the cost of gas pilferage and losses because of law and order problem and shift the benefit of many income-oriented items from consumers to gas companies. This comes to Rs18bn in the case of Sui Northern Gas Pipelines Limited consumers and requires about 5pc increase in tariff.

A comparatively lower revenue will also go to Sui Southern Gas Company.

Rs69bn to be recovered from consumers to offset losses caused by pilferage


The amount will be recovered from consumers for financial years 2012-13 and 2013-14 and will then become part of the tariff for future.

In addition, about Rs50bn will be recovered from consumers as part of normal revenue requirement — Rs33bn for SNGPL and Rs17bn for SSGC. This involves a tariff increase of about 24pc, excluding lower categories of domestic consumers.

The sources said the petroleum ministry and Ogra had been advised to exempt the first two categories of domestic consumers from tariff increase, as desired by the prime minister. The tariff for fertiliser plants will also remain unchanged. This will mean about 10-15pc increase in tariff for higher-end domestic consumers and about 24pc for all other categories.

Earlier, the government considered raising the gas price by 14pc with effect from July 1, but the delayed decision shot up the requirement to an average of 24pc, an official said.

An official statement said the ECC had approved the policy guidelines under Section 21 of the Ogra Ordinance 2002.

According to the guidelines, “volume pilfered by non-consumers, but detected and determined by the companies in accordance with Ogra procedure as provided in Rule 30 of Natural Gas Licensing Rules 2002” will be made part of the revenue requirement for gas companies.

Secondly, “till the finalisation of the new tariff regime by Ogra, the income from non-core activities (late payment surcharge, meter manufacturing plant, royalty from JJVL and sale of condensate/LPG may also be provisionally treated as non-operating income and the provision of doubtful debts may be determined at the minimum of one per cent of the sales in line with the prevailing accounting practices”, the statement said.

The ECC, however, did not allow the idea of “volume against minimum billing amount charged to domestic consumers”.

The finance minister directed all ministries and authorities to discuss the proposals in advance and suggest mutually accepted and well-prepared plans to be accepted by the ECC because it was not a forum for debate on minor details.



On the directive of the prime minister, the ECC allowed to compensate the farmers of basmati rice at Rs5,000 per acre subject to the following provisions:

The subsidy amount of Rs10bn will be equally shared by the federal and provincial governments. The compensation will be made to small growers of 25 acres and those who have already received compensation against crop damage in recent floods in Punjab will not be eligible to this additional compensation.

The ECC extended subsidy introduced in August last year to agricultural consumers at Rs10.35 per unit till June 30, 2015. The subsidy amount of Rs22bn will also be equally shared by federal and provincial governments.

It was also decided that GST would be adjusted against the electricity fee payable to the provinces. During peak hours tubewells will not be entitled to power supply.

The finance minister said the facility was being extended because Punjab farmers had produced a bumper crop of 19.47 million tons during 2013-14. The fuel price adjustment would also be picked up by the federal government, he said.

The ECC allocated around 110mmcfd gas produced in Khyber Pakhtunkhwa to the province for power generation with a condition that gas will be given to the PPIB and available to KP only after following the procedures laid down in rules and regulations of the PPIB

Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

Add comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

The Canadian Securities Institute


CSI is part of Moody's Analytics Learning Solutions, which offers educational programs and credentials throughout the world.

Email Newsletter

Subscribe to receive inspiration, news, and ideas in your inbox.

Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)