- ECC approves maintaining current gas prices, rejecting Ogra’s proposed 10% reduction.
- Gas tariffs for captive power plants (CPPs) increased by Rs250 per mmBtu, aligned with IMF directives.
- Pakistan anticipates surplus revenue of Rs110-115 billion, crucial for addressing circular debt, through these tariff adjustments.
ECC Approves Gas Price Stability, Increases Tariff for Captive Power Plants
ISLAMABAD – The Economic Coordination Committee (ECC), chaired by Finance Minister Muhammad Aurangzeb, convened on Sunday and endorsed the Petroleum Division’s proposal to maintain current gas prices, rejecting a 10% reduction slated by the Oil and Gas Regulatory Authority (Ogra) from July 1, 2024.
Gas Price Adjustment for CPPs
However, the ECC sanctioned a Rs250 hike in gas prices for captive power plants (CPPs), setting it at Rs3,000 per mmBtu, in accordance with the Petroleum Division’s recommendations. Previously, CPPs were charged Rs2,750 per mmBtu.
IMF Directive and Tariff Increase
The government’s decision aligns with directives from the International Monetary Fund (IMF), which mandated raising gas tariffs for CPPs to match RLNG’s ring-fenced cost by January 1, 2025.
Financial Implications
Effective from July 2024, these adjustments are crucial prerequisites for Pakistan’s upcoming IMF staff-level program, anticipated to secure $6-8 billion. The move is expected to generate a surplus revenue of Rs110-115 billion, vital for addressing the country’s burgeoning circular debt, which currently stands at Rs2,900 billion.
Future Adjustments and Efficiency Concerns
Looking forward, the ECC plans to implement an additional Rs700 per mmBtu hike on January 1, 2025, as part of meeting IMF deadlines. The IMF also urges biannual gas tariff adjustments to prevent future circular debt crises.
Strategic Planning
To optimize efficiency, the IMF advocates integrating CPPs into the national electricity grid, citing their current 30-35% efficiency rate and significant natural gas consumption.
