Pakistan Cabinet Greenlights Substantial Gas Price Surge

Pakistan Cabinet Greenlights Substantial Gas Price Surge

Islamabad, February 15, 2024 – In response to the ongoing economic crisis, the federal cabinet of Pakistan has approved a significant increase in gas prices, effective from February 1, 2024.

The decision comes as part of the caretaker government’s efforts to meet the demands of the International Monetary Fund (IMF).

The move follows a meeting of the Economic Coordination Committee (ECC), chaired by Finance Minister Dr. Shamshad Akhtar, which granted approval for a slight tariff increase for protected consumers, ranging from 40 to 66.67%.

Details regarding the exact hike for protected consumers within the first four slabs, utilizing gas up to 0.25 HM3, 0.5 HM3, 0.6 HM3, and 0.9 HM3, are known only to the interim finance minister and energy minister. The federal cabinet is expected to make the final decision on this matter.

The decision to raise gas prices aligns with the IMF’s structural benchmark criteria, with the deadline for implementation set until February 15, 2024. Notably, the tariff adjustments do not apply to the roti tandoor, commercial, power, and cement sectors.

For the CNG sector, the ECC has approved an increase in the gas tariff to Rs3,750 per MMBTU from Rs3,600 per MMBTU. In the fertilizer sector, the proposed gas prices for feed purposes for Engro and Fauji fertilizers have been suggested at Rs750 per MMBTU.

However, protected domestic consumers, particularly in the agricultural sector, will witness a reduction in the initially proposed increase. For Agritech and Fatima fertilizers, the gas prices have been raised to Rs1,597 from Rs1,239 per MMBTU, and for fuel purposes, the tariff has increased to Rs1,750 from Rs1,580 per MMBTU.

In the case of non-protected domestic consumers, the ECC has approved gas price increases ranging from 5% to 66.67%. The tariff adjustments vary based on consumption levels, with higher consumption tiers experiencing proportionally lower percentage increases.

The impact of these adjustments is expected to affect consumers in various sectors, including agriculture, domestic use, and industrial activities. The decision to raise gas prices is likely to have economic implications, with consumers, particularly those in the non-protected category, facing increased costs for gas consumption.

The caretaker government’s decision to approve the gas price hike is seen as a response to the challenging economic conditions and an effort to meet the conditions set by the IMF. However, it also raises concerns about the potential impact on consumers and businesses, adding to the broader discussion on economic management and policy decisions in Pakistan.