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Hike in gas, power tariff inevitable ahead of IMF board meeting

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1 year ago

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  • Govt will have to notify increase in gas rate by 45-50%.
  • It must also increase power tariff by Rs3.50-Rs4 per unit.
  • Measures crucial for ensuring IMF funds come through.

ISLAMABAD: Pakistan will have to notify an increase in gas sale price by 45-50% and electricity base tariff by Rs3.50 to over Rs4 per unit for the FY2023-24 prior to the International Monetary Fund’s (IMF) Executive Board’s meeting, which is due on July 12.

The increase in energy prices will pave the way for the $3 billion programme under the Stand-By Arrangement (SBA) agreed with the IMF at the staff level, a senior official of the energy ministry told The News.

“The Oil and Gas Regulatory Authority (Ogra) on June 2 announced an increase of 50% (Rs415.11 per MMBTU) for the consumers of Sui Northern Gas Pipeline Limited (SNGPL), pushing the subscribed gas price up to Rs1,238.68 per MMBTU,” the official said.

“The regulator also increased the gas price by 45% (417.23 per MMBTU) for the consumers of Sui Southern Gas Company Limited (SSGCL) for 2023-24. However, the government is yet to notify the increase in the gas price for the financial year 2023-24.”

“The SNGPL still has the previous year’s accumulative shortfall of Rs560.378 billion up to FY23, while Sui Southern has a shortfall of Rs97.388 billion,” he added.

Last time, the federal government notified the category-wise gas sale prices to increase from January 1, 2023. Under the government’s existing policy, high-end consumers are providing the cross-subsidy to low-end consumers.

“The government is most likely to continue the policy under which high-end consumers will pay the gas price for the low-end consumers also from July 1, 2023.”

The whole energy sector, he said, is in the trap of circular debt of over Rs4,300 billion (Rs1,700 billion in the oil and gas sector and Rs2,600 billion in the power sector).

The IMF’s top mandarins want Pakistan authorities to make the energy sector viable and sustainable by increasing the rebase tariff for the financial year 2023-24.

NEPRA may announce soon the rebase tariff determination by Rs3.5- to over Rs4 per unit, which is to be effective from July 1, 2023. After that, the government would notify it.

However, the most worrying part of the base tariff is the capacity charges payments, whose share in the base tariff has increased to 63% in the next financial year from 57% in the outgoing fiscal.

The end consumers are expected to pay Rs1.3 trillion to 1.5 trillion just in the head of capacity payments in the financial year 2022-23 ending on June 30, well-placed officials in the Power Ministry told The News.

Next year, the volume of capacity payments, the officials said, is to surge by another Rs1 trillion, jacking it up to Rs2.5 trillion. This is how the contribution of capacity payments alone in the base tariff would increase up to 63%.

“The country’s installed capacity has surged up to 44,000 MWs, according to the officials but the economic survey for 2022-23 says it stands at 41,000 MWs. Next year about 1,500 MWs would be added and this is how more capacity charges end consumers will pay.”

The base tariff is the Nepra-determined tariff, which stands at Rs24.80 per unit for the financial year 2022-23.

However, the government has notified it at Rs24 per unit. If the required increase is added, then the base tariff for FY24 will go up to close to Rs29 per unit.

However, the base tariff doesn’t include surcharges, taxes and duties, as the imposition of taxes, duties, and surcharges is the sole prerogative of the federal government.

The power purchase price (PPP) constitutes 90% of the tariff, out of which capacity charges payments share will be 63%.

At present, the power sector has virtually become unsustainable as its circular debt has swelled to over Rs2.5 trillion, and the government cannot pay the amount to powerhouses against the electricity it purchases from them, high system losses, less recovery, and inadequate budget subsidy.

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

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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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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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2 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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