The government is expected to increase gas prices significantly around mid-February to satisfy the International Monetary Fund (IMF). This could lead to a rise of around 41 percent in gas rates, causing another round of inflation for the public.
The IMF claims that raising gas prices is critical to reducing the mounting circular debt, according to a report. If implemented, this would be the second hike in fuel prices since November 2023 when the Oil and Gas Regulatory Authority (OGRA) first notified the new natural gas prices.
Analysts at Optimus Capital Management said SNGPL may hike rates by 41 percent to an average of Rs. 1,753 per unit while SSGC is tipped to raise gas prices by 15 percent to an average of Rs. 1,696 per unit.
These hikes are expected to solve income shortfalls experienced by the gas distribution firms. Given that the government presently subsidizes gas to home users and fertilizer makers, the proposed price increase may vary by consumer sector, such as domestic, commercial, and industrial.
The IMF is suggesting that Pakistan should get rid of cross-subsidies and have a consistent pricing system for everyone. In simple terms, they want the government to make adjustments to gas tariffs every six months, stop giving special subsidies to the fertilizer industry, gradually reduce the use of self-generated power, set the same rates for businesses exporting and not exporting, regularly report on the flow of gas debts, and come up with a plan to manage circular debts.
Latest From the IMF on Gas
In its first assessment within the $3 billion Standby Arrangement for Pakistan, the lender mentioned that the recent rises in electricity and gas prices were necessary to support the sustainability of the energy sector. However, it also pointed out that more comprehensive changes are still required to address the consistently high costs in the energy sector.
