The Oil and Gas Regulatory Authority (OGRA) has approved an increase in gas prices for the current fiscal year, Express News reported. According to an announcement from OGRA, gas prices for Sui Northern Gas Company will rise by 8.71%, while Sui Southern Gas Company will face a price increase of 25.78%.15
The Oil and Gas Regulatory Authority (OGRA) has taken a controversial step, approving a significant increase in gas prices that will impact consumers across Pakistan. This move, which is subject to final approval by the federal government, comes at a time of heightened financial pressures on both the energy sector and households.
Breaking Down the Hike
The approved price hikes average 25.78% for consumers in Sindh and Balochistan, while those in Islamabad, Punjab, and Khyber Pakhtunkhwa will face a comparatively lower increase of 8.71%. This marks yet another blow to the already burdened domestic consumers, who have seen gas prices rise three times since January 2023. If finalized, the new tariff structure will set the average price for:
Sui Southern Gas Company (SSGC) at Rs1,762.51 per MMBTU
Sui Northern Gas Pipelines Limited (SNGPL) at Rs1,778.35 per MMBTU
These adjustments aim to address the financial requirements of Rs527.55 billion for SNGPL and Rs319.78 billion for SSGC, including the recovery of prior receivables. Notably, the companies had initially requested price hikes as high as 208.67%, sparking public outcry during hearings conducted by OGRA last month.
Rising Burdens on Consumers
For domestic consumers, this latest decision could represent the fourth increase in gas prices within two years. In November 2024, the government had already hinted at further hikes, citing the need to bridge financial gaps for gas companies. Here are some key highlights of previous and proposed increases:
SNGPL: Initially sought a Rs64.16 per MMBTU increase, which would have brought the average price to Rs1,810.38 per MMBTU.
SSGC: Requested a hike of Rs669.07 per MMBTU, raising its average price to Rs1,920.39 per MMBTU.
These proposals follow a history of substantial price revisions. Since early 2023, more than Rs900 billion has been added to the financial burden on gas consumers. For many households, this has led to increased energy costs amidst inflation and economic uncertainty. Low-income families have been disproportionately affected, with some facing energy insecurity due to unaffordable bills.
The Economic Impact
The rationale for these price hikes lies in the mounting financial pressures on Pakistan’s gas companies. Both SNGPL and SSGC face deficits due to rising operational costs, the depreciation of the Pakistani rupee, and past adjustments that have yet to be recovered. SNGPL alone has been granted permission to recover over Rs50 billion from previous adjustments, while SSGC will recover Rs48.85 billion.
While these measures aim to stabilize the financial health of the gas sector, they come at a steep cost to consumers. The higher tariffs could lead to increased production costs for industries reliant on natural gas, potentially driving up prices of goods and services. For export-oriented industries, higher energy costs may erode competitiveness in international markets. Moreover, households may need to adjust their budgets to cope with escalating utility bills, which could reduce disposable income and stifle domestic consumption.
Public Response and Political Repercussions
The decision has drawn criticism from various quarters, with concerns about its impact on the middle and lower-income classes. Political parties, including opposition leaders, have warned of potential street protests if the federal government approves the tariff hikes. Fazlur Rehman, a key political figure, recently cautioned the government about unrest over other policy decisions, adding to the growing discontent. Civil society organizations and labor unions have also voiced their concerns, emphasizing the need for a more inclusive approach to energy reforms.
Public frustration is further compounded by a perceived lack of transparency in how gas companies manage their finances. Calls for audits and restructuring of the gas sector have grown louder, with critics pointing to inefficiencies and leakages in the system that contribute to financial losses.
What Lies Ahead?
OGRA’s recommendations now await final approval from the federal government. If the proposed increases are implemented, a formal notification will follow, further cementing the financial burdens on consumers. Meanwhile, debates over the efficiency and transparency of gas companies continue, with calls for reforms to address systemic issues within the energy sector.
The federal government faces a delicate balancing act. On one hand, it must ensure the financial stability of gas companies to maintain supply and infrastructure development. On the other, it must protect consumers and industries from unsustainable cost burdens. Policymakers must also explore long-term solutions, such as diversifying energy sources, enhancing energy efficiency, and reducing reliance on imported fuels.
As Pakistan grapples with these developments, the need for sustainable energy policies that balance economic stability with consumer protection has never been more urgent. For now, the country awaits the federal government’s final verdict on the matter, with the potential for widespread public response looming on the horizon.