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Karachi, Caretaker Federal Minister for Energy, Power and Petroleum, Muhammad Ali, responded to the rising concerns of the business community regarding escalated gas tariffs. He committed to pushing for tariff reductions during upcoming Cabinet meetings. This endeavour aims to prevent the circular debt from intensifying further, amid mounting losses in the gas sector.
According to a news release by the Karachi Chamber of Commerce and Industry (KCCI), during his visit to the chamber, Minister Muhammad Ali shed light on the ongoing fiscal challenges the gas sector faces. The industry has experienced consistent losses, approximating Rs400 billion annually for several years. Last year, this deficit peaked at Rs461 billion, pushing the total loss to a staggering Rs2100 billion, leading to recommendations for a tariff hike.
The Minister indicated ongoing efforts to disburse Rs7 billion, owed to industries for past incremental consumption. He also mentioned the Ministry’s intentions to roll out a winter package for this year’s incremental consumption.
In his address, Muhammad Ali stated, “OGRA’s determination of Rs1350 per MMBtu takes into account the yearly average pricing which pertains only to natural gas losses, excluding the pricier LNG costs.” He detailed the ECC’s gas tariff increase strategy, highlighting its implications: 60% of domestic consumers will experience a Rs400 monthly hike. Tariffs for more affluent consumers now align with LNG prices, while tariffs for Tandoor Operators remain unchanged. Commercial users, encompassing hospitals and educational institutes, will see a modest tariff increase, as will the fertilizer sector, to maintain commodity prices.
Addressing industrial concerns, he said the government ensures competitiveness by setting gas tariffs at about US$8, comparable to neighbouring countries’ rates. He emphasized equalizing the gas tariff discrepancy between the country’s northern and southern regions.
Discussing supply continuity, the Minister said the gas availability scenario for the current year mirrors the previous year. However, SSGC has received guidance to ensure uninterrupted gas supply to industries five days a week, year-round. He mentioned efforts to prevent last year’s industry closures and export-oriented industry supply reductions.
Chairman BMG, Zubair Motiwala, while recognizing the domestic gas tariff increase, urged the government to reconsider the drastic tariff hikes proposed for export-oriented and general industries. Motiwala expressed concerns about the disproportionate gas tariff recommendations for these industries, citing potential negative implications for exports and industrial support.
Additionally, Motiwala highlighted the ongoing gas supply challenges, stressing the need for a more equitable gas distribution mechanism between SSGC and SNGPL, especially during peak winter demand.
Addressing electricity tariffs, Motiwala called for reductions, emphasizing the survival of Small and Medium-Sized Industries. He questioned the applicability of peak and off-peak tariffs given the surplus power situation.
President KCCI, Iftikhar Ahmed Sheikh, also voiced his concerns about the gas tariff surge, terming it ‘unviable, unacceptable and unfeasible’. He urged the government to reconsider and make these tariffs sustainable to keep Karachi’s industries operational.
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