Gas prices may go up after all

Are the authorities using an increase in gas prices as an icebreaker in the parleys with the IMF staff for the release of a USD 1.18 billion tranche of funding?

By Naveed Naqvi

ISLAMABAD: Goaded by the International Monetary Fund (IMF) to increase their revenue, the authorities in Pakistan seem finally ready to relent on their persistent resolve not to further burden the masses already staggering under sky-high cost of living.

The Ministry of Petroleum has started groundwork for an increase in gas prices, Independent Pakistan can report on good authority. Official sources say Oil & Gas Regulatory Authority (OGRA) has sent the guidelines for approval and that gas price for industries is likely to increase by PKR 667 per mmbtu.

Gas price for domestic consumers in the Punjab and Khyber-Pakhtunkhwa provinces is likely to increase by PKR 488 per mmbtu to PKR 667 respectively. The price of LNG for Sui Northern Gas is expected to increase by PKR 1,015 per mmbtu.

If the authorities indeed decide to hike gas prices, the new tariffs will have to clear the ECC and the cabinet. However, before taking any such decision, Prime Minister Shehbaz Sharif will take his Pakistan Democratic Movement (PDM) allies into confidence over the measure.

An increase in gas prices has been one of the many energy sector reform measures the IMF has been insisting on in view of the sector’s crippling circular loan burden. The successive government’s policy to keep gas prices low has added to this burden over the last two years.

This is one of the points of contention blocking progress of the 9^th review of the USD 7 billion Enhanced Fund Facility (EFF) program, holding up the release of a USD 1.18 billion tranche of funding to Pakistan’s anemic economy. It is possible that the authorities are using an increase in gas prices to break the ice with the Fund.