Energy Minister Hammad Azhar announced on Friday that the government plans to introduce a new pricing mechanism to charge consumers for imported gas.
In this regard, he also said that it was decided to suspend all ongoing projects and new connections of Sui gas companies until the legislation on the new mechanism is completed.
“Local gas reserves [are] running out at the rate of 9pc per year. The government does not have a legal mechanism to collect the costs of imported gas from consumers. We have forged a consensus on a new pricing mechanism, but until its legislation, the government stops any expansion of national gas networks, ”he said in a tweet.
Addressing a press conference alongside Minister of State for Information and Broadcasting Farrukh Habib, Azhar explained the need for the new mechanism as a measure to overcome the gas shortage, which he attributed to the ‘exhaustion of local gas reserves.
“Currently, only 28% of total households receive gas through pipelines,” he said, adding that local gas reserves had been depleted at such a rapid rate that the product was now insufficient for fertilizers and other industries.
The minister said it was often proposed that the government source more liquefied natural gas (LNG) and feed it into pipelines supplying gas from local reserves in order to alleviate the shortage.
He dismissed this suggestion as a solution to the problem, pointing to the lack of the infrastructure necessary to move imported gas through pipelines beyond a limit of 1,200 to 1,300 million cubic feet per day (mmcfd) .
In addition, he said, it has been found in recent years that the introduction of imported gas into pipelines here caused a loss of Rs 35-40 billion to Sui gas companies as the utilities could not charge consumers for imported gas. separately.
Therefore, he explained, “we are proposing a new pricing mechanism to charge consumers for imported gas,” so that when the imported gas was introduced into domestic pipelines, the gas companies did not suffered huge financial losses.
“This (new pricing mechanism) is called weighted average cost,” he added.
Azhar said legislation on the matter was pending and until the system was introduced, the expansion of national gas networks had been halted.
“Unlike previous governments, we cannot continue to develop infrastructure to meet the demand for gas without increasing the supply of the raw material.”
The minister further noted that it was not just Pakistan, but the whole world was grappling with a gas crisis. Comparing the situation here with that of European countries, he gave the example of the United Kingdom, where he said that the price of gas had increased by 500 pc in recent times.
“In Pakistan, the crisis is not so serious,” he commented.
He also dispelled reports that a gas shortage in the country was the result of insufficient LNG supply, saying there was enough LNG in the system.
Speaking about the increase in the electricity tariff, he said the government had proposed to the National Electricity Regulatory Authority to increase the price of electricity by 1.39 rupees per unit.
“However, we will also introduce a new QTA (quarterly tariff adjustment) of 15 to 24 paisa, and the increase will therefore amount to Rs 1.10,” he added.
The minister said the increase would not apply to consumers using less than 200 units of electricity.
He added that the government had also announced a seasonal electricity package, under which consumers would be supplied with electricity at reduced tariffs during the winter.
Describing the steps taken to improve recoveries and losses in the electricity sector, Azhar said that circular debt, which had increased at a rate of 450 billion rupees when the PTI formed the government, was now increasing to a reduced rate of 150 billion rupees.
“However, we need to take more measures to further narrow this gap and we are taking action in this regard,” he added.