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IMF diktat: Authorities mull 100% increase in gas tariff for protected consumers

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12 months ago

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  • Gas system faces Rs100 billion deficit on their account.
  • Govt mulls ending disparity between export and non-export sectors.
  • IMF has asked Pakistan to curb circular debt in energy sector.

ISLAMABAD: The federal government is planning to hike gas tariff for protected consumers and end disparity in gas tariffs between export and non-export industries from January 2024 in line with International Monetary Fund (IMF) conditions, The News quoted a senior energy ministry official as saying on Tuesday.

The official told the publication that the authorities are working on a staggered increase for ‘protected residential consumers’ across the country from January 2024, as the gas system faces an Rs100 billion deficit on their account.

This yet another increase, follows the 193% gas tariff hike in November 1, 2023. In that however, the protected gas consumers didn’t experience any increase except for that in meter charges from Rs10 to Rs400 per month. These protected gas consumers constitute 57% of the total countrywide consumers.

The authorities want to increase the gas prices of the protected consumers by 100% in two phases, in January and July 2024, which are currently at the lowest ebb compared to the other categories of domestic consumers. Therefore, it would do away with the Rs100 billion deficit incurred on the facility in a staggered manner.

Under the IMF diktat, the government is also set to end the disparity of gas tariff between export and non-export industries in January 2024 which will fetch them a Rs20-30 billion more revenue. The export and non-export sectors will be treated as one industrial sector with uniform tariffs, top officials of the energy ministry told The News. 

In addition, the IMF also wants the government to do away with the cross-subsidies of Rs27 billion being extended to the fertilizer giants — Engro Fertilizer in the Sui Northern system and Fauji Fertilizer Bin Qasim Limited in the Sui Southern system.

“Those captive power plants connected with the natural electricity grid would not be provided gas, but those not connected with the national grid will now get the RLNG and not the local gas. The government is working to increase the gas tariff for the export sector by Rs100 per MMBtu both for export and captive plants to bring their tariff at par with the tariff of non-export industry.” 

“According to IMF directions, these measures would generate additional revenue of over Rs100 billion. This would scale down the natural gas circular debt that currently stands at Rs1,250 billion,” officials said.

At present, the gas tariff for the export sector stands at Rs2,100 per MMBtu and for non-export is at Rs2,200 per unit. The gas tariff for captive power plants for the export industry stands at Rs2,400 per MMBtu and for captive power plants of the non-export industry is at Rs2,500 per MMBtu. 

“The authorities want to end the disparity between their tariffs which will help raise the revenue of Rs20-30 billion per year.”

Coming towards the cross-subsidy of Rs27 billion being extended to the fertilizer sector, the officials said that the gas tariff for feedstock stands at Rs580 billion and Rs1,580 per MMBtu as fuel. The authorities want to end the cross-subsidy of Rs27 billion by bringing their tariff to Rs1,271 per MMBtu both for feedstock and fuel purposes.

Despite the rise, they argued that the expected increase for protected consumers would stay much below that of the other categories. In the first phase from January 2024 it would reduce to half the Rs100 billion deficit. The next phase of a hike from July 1 will remove the remaining Rs50 billion deficit.

According to the revised calculation in wake of the proposed increase, 0.25hm3 category will pay Rs242 from existing Rs121 per MMBtu, 0.5hm3 consumers tariff will hike to Rs300 from Rs150 per MMBtu, 0.6hm3 consumers tariff will go up to Rs400 from Rs200 per MMBtu and 0.9hm3 category of consumers tariff will be at Rs500 from Rs250 per MMBtu.

The government has already increased the gas tariff by up to 193% from November 1, 2023 under which it will collect revenue of Rs980 billion in the ongoing FY24 even though the revenue requirements of both the gas companies stand for ongoing FY24 at Rs705 billion. 

This has allowed the collection of an additional Rs275 billion to pay the Rs210 billion cost incurred for RLNG diversion to the domestic sector in the ongoing winter season. It also offsets the loss of Rs65 billion incurred due to the failure of the government to notify gas price hike four months late.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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3 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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3 days ago

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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4 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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