Ministry wants more: ECC allows 13 per cent increase in gas prices for fertiliser plants

 Some ministers oppose rise in fuel prices for fertiliser manufacturers, CNG outlets . DESIGN: CREATIVE COMMONS

ISLAMABAD: 

The Economic Coordination Committee (ECC) of the cabinet has quietly given the go-ahead to the Ministry of Petroleum and Natural Resources to increase gas price by 13.15 per cent for fertiliser manufacturers with immediate effect.

The ministry had proposed an increase of 100 per cent in gas price for fertiliser plants effective from July 1, 2011. However, ECC accorded approval for an increase of 13.15 per cent which was worked out by the Oil and Gas Regulatory Authority (Ogra) and directed the petroleum ministry to seek approval either from the prime minister or cabinet for the 100 per cent increase.

The ministry had sought ECC’s approval for increasing gas tariff from 10 to 15 per cent for domestic consumers, 15 to 20 per cent for commercial and industrial consumers and 100 per cent for fertiliser manufacturers. It had also proposed taking prices of Compressed Natural Gas (CNG) to 65 per cent of petrol price. At present, CNG price stands at 50 per cent of petrol price.

Sources said during the meeting of ECC on Thursday, some ministers opposed the increase in gas prices for CNG outlets and fertiliser plants.

Fertiliser factories are paying Rs59.28 to Rs102.01 per million British thermal unit (mmbtu) for gas being used as feedstock in Sui Northern Gas Pipelines Limited’s (SNGPL) system. Commercial consumers are paying Rs563.76 per mmbtu, CNG Rs503.63 per mmbtu, industrial consumers Rs382.37 per mmbtu and power plants Rs332.36 to Rs980.61 per mmbtu.

“The petroleum ministry wants to end distortion in gas prices and ECC has in principle agreed to this by approving the increase in prices,” an official said, adding, however, the issue would be taken up with the prime minister and cabinet for a formal approval.

“If power plants and other consumers are paying higher prices for gas, then why fertiliser manufacturers should not pay the same price,” the official said, adding the idea behind the increase in gas price for fertiliser units by 100 per cent was to bring it on a par with prices paid by other consumers.

Sources stressed that old fertiliser plants had benefited much from cheaper gas supply and the subsidy could not continue for long as different sectors, particularly textile, were protesting against the concession.

Published in The Express Tribune, July 2nd, 2011.

Up, up and away: 10 to 100% increase in gas prices proposed

CNG stations might be closed for two to four days a week in a bid to divert gas supply to power plants. PHOTO: FILE

ISLAMABAD: 

The government has worked out a plan to increase prices of gas from 10 to 100 per cent from the new financial year beginning July in a bid to end cross-subsidy, which was agreed to with multilateral lenders.

Sources told The Express Tribune that the plan would be tabled before a high-level meeting today (Wednesday), to be chaired by Minister for Petroleum and Natural Resources Dr Asim Hussain, to take a final decision.

The plan will be implemented after seeking formal consent of the Ministry of Finance and Planning Commission.

According to sources, the government is particularly focusing on reducing cross-subsidy which comes in the range of Rs35 to Rs40 billion per annum. Under this system, fertiliser manufacturers are supplied gas at reduced rates and the balance is received from the textile and other industrial sectors in the shape of higher gas prices.

The textile sector has been protesting against the cross-subsidy to domestic and fertiliser sectors, saying it leads to an increase in cost of doing business and makes textile products uncompetitive in the international market.

Oil and Gas Regulatory Authority (Ogra) has already decided an increase of Rs5.08 and Rs7.54 per million British thermal unit (mmbtu) in gas tariffs for consumers of Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) from July 1.

CNG price may rise 50%

Sources said the petroleum ministry had prepared a proposal to bring the price of Compressed Natural Gas (CNG) on a par with that of petrol and as a result CNG price would rise by around 50 per cent.

The proposed increase in gas price for fertiliser plants was 100 per cent, which would remove subsidy from the sector, sources said, adding the government was also providing Rs11 billion in annual subsidy on feed stock of fertiliser manufacturers.

For domestic consumers, sources said, the petroleum ministry wanted to increase gas prices by 10 per cent.

The government has already committed to multilateral lenders that it will end subsidies in all sectors gradually and this proposed plan of gas price increases is part of the commitment.

The Planning Commission has recommended to the government to increase gas prices by 15 per cent on quarterly basis to bring them on a par with other fuels.

Govt may increase gas outages

As the country is facing acute power shortages, the government is working on a proposal to increase gas outages for Compressed Natural Gas (CNG) stations from two to four days a week in a bid to divert gas supply to power plants, sources say.

A high-level meeting in this regard will be held in the Ministry of Petroleum today (Wednesday) which, among others, will be attended by officials of Sui Northern Gas Pipelines Limited, Sui Southern Gas Company and Karachi Electric Supply Company.

The ministry will seek a formal approval for the proposal from the Economic Coordination Committee of the cabinet.

Sources said the ministry had prepared a proposal for suspension of gas supply to CNG stations for three to four days a week, adding the schedule of gas outages for industrial sectors might also be revised.