Gas Prices likely to increase 86% by the government – Research Snipers

Gas Prices likely to increase 86% by the government

The new government under PM Imran Khan leadership is likely to increase the prices by almost doubling the current prices by up to 86%, the move is being considered to bailout the suffering public companies including Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) that are on the borderline of bankruptcy.

The companies have also delayed the notification of revised gas prices during the previous PMLN government. The former government kept the prices unchanged for long-term political scoring which put the companies in jeopardy and worsens their financial situation.

According to the officials, the circular debt is mounting to a dangerous situation for these companies, if that continues the companies might suspend their operations, the government is now expected to intervene and help the utilities to reduce their financial losses by increasing gas prices.

The meeting of Economic Coordination Committee (ECC) is scheduled for Wednesday in which the matter regarding the financial situation of utilities and possible remedies would be discussed along with gas prices. Economic managers would attend the meeting to come to a decision, the officials told that Ministry of energy (Petroleum Division) recommended a summary in which 30% increase in prices was proposed for all gas consumers including industrial, commercial and power consumers except for residential consumers.

However, for the first slab of residential consumers, the ministry has recommended the 86% increase in gas prices.

Currently, the gas price for residential/domestic consumers for the first slab is Rs110 per unit whereas the actual price is Rs630 per unit. The government is giving a subsidy of Rs520 per unit to consumers which is quite big to become bearable.

SNGPL spends Rs630 per million British thermal units (MMBtu) to purchase the gas from 40 different sources on average; however, the average selling price of the unit is Rs390 per unit. Due to this huge difference, the companies are being indebted for the last several years.

According to the data on August 20, 2018, SNGPL’s payables recorded at Rs171.1 billion and receivables recorded at Rs165.01 billion. SSGC’s receivables were recorded at Rs203.6 billion and payables at Rs148.8 billion.