The International Monetary Fund (IMF) will likely raise questions over the government’s decision to delay notifying the increase in gas tariff determined by the Oil and Gas Regulatory Authority (OGRA) back in June.

With the lender’s upcoming review under its $3 billion Standby Arrangement for a $1 billion tranche due in November, the government has no choice but to raise the gas rate by up to 50 percent. Both gas firms are facing a Rs. 657.766 billion shortage, according to a National Daily. IMF may raise this issue with Pakistan ahead of the review meetings if the increase is not notified.

On June 2, 2023, OGRA announced a 50 percent increase (Rs. 415.11 per MMBTU) for SNGPL customers, raising the gas price to Rs. 1,238.68 per MMBTU. Meanwhile, the regulator raised the gas tariff for SSGCL customers by 45 percent (Rs. 417.23 per MMBTU) for 2023-24.

For the financial year 2022-23, Sui Northern still has an aggregate shortfall of Rs. 560.378 billion and Sui Southern Rs. 97.388 billion, bringing the total shortfall of both gas firms to Rs. 657.766 billion.

The previous government had explored numerous scenarios for a petrol price hike based on political damage control, in which low-income consumers would pay less and high-income consumers would pay the most to compensate for low-income consumers. However, the old government didn’t pursue this course of action, and the burden for a gas tariff hike now rests with the week-old caretaker government.

The IMF wants the government to devise a strategy to eliminate Rs. 1.7 trillion in oil and gas sector circular debt, Rs. 1.3 trillion of which is owed by the gas sector. If and when implemented, such a strategy would allow the federal government to inject around Rs. 414 billion into SNGPL and SSGCL through additional grants for payment of outstanding dues to gas producers OGDCL, PPL, and GHPL. Likewise, OGDCL and PPL will arrange Rs. 56 billion on their own and may sell a few investment bonds.

Resultantly, SNGPL and SSGCL would use this money (Rs. 414 billion) to pay outstanding liabilities to the OGDCL of around Rs. 225 billion, PPL Rs. 62 billion, and GHPL Rs. 127 billion. In exchange, the three gas producers would pay the federal government Rs. 475 billion in dividends on their retained revenues, which are anticipated to be over Rs. 1.44 trillion as of June 30, 2022.

Source: Pro Pakistani