Government Assures 57% of Consumers Unaffected by Gas Tariff Increase

In a recent address, Pakistan's Minister for Energy, Muhammad Ali, tackled pressing concerns within the nation's energy sector. Minister Ali highlighted the government's resolve to address the longstanding issue of circular debt in the gas sector, which has led to financial losses and prompted several companies to exit the country.

During a joint press conference with Minister for Information and Broadcasting, Murtaza Solangi, Minister Muhammad Ali delved into the recent uptick in gas tariffs. He underlined that this adjustment would not impact a substantial 57 percent of consumers nationwide. Instead, the increase is a pivotal step toward managing and eventually eradicating the persistent circular debt that has plagued the petroleum sector.

Minister Ali stressed that the gas price increase had secured approval from the Economic Coordination Committee (ECC) and was set for final ratification in an upcoming federal cabinet meeting. Notably, the new gas prices are scheduled to come into effect on November 1, 2023, deviating from the initially proposed date of October 1, 2023, in accordance with the recommendation of the Petroleum Division.

Minister Muhammad Ali further elaborated that out of approximately 10 million consumers, gas prices for 5.7 million consumers will remain unchanged, safeguarding the interests of a significant portion of the population.

Turning to the issue of energy and oil procurement, the minister disclosed that Pakistan had inked a commercial oil purchase agreement with Russia. This agreement entails an annual import of 9 million metric tons of oil, promising significant cost savings, potentially ranging between $10 to $15 per barrel compared to other sources.

Circular debt, a persistent concern in Pakistan's energy sector, has currently amassed to an estimated 400 billion rupees. Minister Ali emphasized that the recent gas price increase would benefit exploration companies and is a necessary step to address the circular debt issue.

The minister clarified that the government would refrain from installing new gas connections, and existing domestic connections would need to transition to LPG within the next one to two years. Future gas supplies will primarily target power generation, aligning with global practices where gas serves as a primary source of power rather than residential use.

In response to concerns regarding the perception that the affluent have benefited from the gas price increase, Minister Ali stated that gas access was limited in many rural areas, with only 30% of the population having access. The remaining 70% rely on alternatives such as LPG and wood for fuel.

He further detailed that a uniform gas tariff had been established for both old and new industrial gas connections, reducing the price discrepancy between the North and South regions in the industrial sector. Nevertheless, gas rates increased for non-export industries.

Minister Muhammad Ali discussed pressing issues surrounding natural gas in Pakistan. The ban on new gas connections, gas tariffs, and the transition to LPG took center stage. Ali also highlighted the importance of international investment and government collaboration with regulatory authorities.

Natural Gas Ban:

When questioned about the ban on new gas connections, the minister made it clear that there are no immediate plans to lift it. The reason? Declining availability of natural gas. It's a challenge that demands attention, especially when you consider that natural gas reserves are depleting at a rate of around 9% per year.

"Ensuring a sustainable energy future is our priority," Minister Ali asserted.

Minister Ali expressed optimism about the recent gas tariff increase, which he believes could attract international investment in oil and gas exploration activities in Pakistan. He emphasized the need for a comprehensive exploration policy framework to facilitate this transition. Moreover, he highlighted the ongoing collaboration between the government and the Oil and Gas Regulatory Authority (OGRA) to address issues related to LPG price control.

These developments are integral to the Pakistan Economy, Business in Pakistan, and Technology in Pakistan. The energy sector's evolution will have a far-reaching impact on these domains.

Winter Gas Supply:

Concerns about gas supply during the peak winter season were addressed by the minister. He assured domestic consumers that they would continue to have access to gas for eight hours daily, aligning with previous years' supply patterns. 

"Ensuring uninterrupted energy access is our commitment," Minister Ali stated.

Minister Ali's insights shed light on the challenges and opportunities in Pakistan's energy landscape. The decisions and actions taken will not only shape the energy sector but also have a ripple effect on the wider Pakistan Economy, Business in Pakistan, and Technology in Pakistan. Stay tuned as these developments continue to unfold.