PM orders biannual price projections for fuel and electricity

ISLAMABAD: Prime Minister Imran Khan asked the Energy Ministry to make six-month price projections for petroleum, liquefied petroleum gas (LPG), regasified liquefied natural gas (RLNG) and electricity and to come up with specific measures to absorb the rise in their prices, informed sources have said Business recorder.

These instructions were given to the Ministry of Energy at a time when it is severely criticized for not having procured RLNG, used in the electricity sector, when its prices were lower on the international market.

The public also criticizes the government for the continued price increase of POL prices. The planned increase in the oil tax from Rs 4 per month until it reaches the cap of Rs 30 per liter under the agreement with the International Monetary Fund (IMF) will attract further criticism.

The price of LNG has also increased in the country. The new price of LPG per kg has increased from Rs 204 to Rs 217. The new price of the domestic LPG cylinder has increased from Rs 2,404 to Rs 2,559 and that of the commercial cylinder from Rs 9,248 to Rs 9,847 for November.

Oil Prices Hold As PM Rejects OGRA Proposal

Electricity prices are also on the rise due to soaring prices for fuel oil, HSD, coal and RLNG on the international market. On average, consumers are forced to pay Rs 2 per additional unit monthly under the FCA on top of the base rate increase and Quarterly Rate Adjustment (QTA).

The Central Power Purchasing Agency Guaranteed (CPPA-G) has requested 4.57 rupees per unit of nightclub rate increase for October 2021. Nepra will hold a public hearing on the CPPA-G’s request this week. KE has also filed a request to increase its tariff under the FCA mechanism.

The sources said that energy sector issues were recently discussed at a meeting of the economic team, chaired by the prime minister. Representatives of the Ministry of Finance, the Ministry of Planning, Development and Special Initiatives and the Ministry of Energy (Petroleum and Energy) gave various justifications for the recent rise in the prices of energy-related fuels.

The sources said that during the meeting, some of the participants argued that the relevant ministries should prepare projections of energy prices against needs for the next six months so that fluctuations, if any, can be absorbed.

The Prime Minister also ordered the Petroleum Division to rationalize gas tariffs for captive generating plants to the same level as grid electricity to encourage a switch to grid electricity.

The sources said at the Cabinet Committee on Energy (CCoE) meeting on November 18, 2021, Planning, Development and Special Initiatives Minister Asad Umar, who is also the chairman of the ECC, said asked trade and investment advisor Abdul Razak Dawood to convince industries to switch to electricity instead of gas, to manage the supply constraint in winter, with the assurance that the Ministry of Energy (Electricity Division) will ensure the uninterrupted supply of electricity to the industry.

The Cabinet decides to increase the gas tariff for the captive

The CCOE made the following decisions which were also ratified by the Federal Cabinet: (i) natural gas / RLNG to be supplied continuously to export oriented industries, including the top 50 exporters; (ii) the supply of gas / RLNG to captive export-oriented power plants will be monitored until December 15, 2021. It will be readjusted according to the supply / availability of gas; (iii) The CNG sector will remain closed with effect from December 1, 2021 to February 15, 2022; (iv) General industry (non-exporting) will receive gas on a weekly rotation basis, with one day off, for each sector or zone. The cement industry will be treated on the same basis as the general non-exporting industry; (v) to stimulate agricultural productivity, an uninterrupted supply of gas must be ensured to the fertilizer sector; (vi) consumers dedicated to the electricity sector must benefit from an uninterrupted gas supply; (vii) electricity production based on LNG will benefit from an additional supply of 5% during the winter compared to the actual consumption of last year; and (viii) after meeting national gas requirements for critical industries, maximum efforts will be made to accommodate domestic consumers as a priority, as already decided by the ECC.

The CCoE also requested the Petroleum Division to make a presentation to the CCoE, on the gas supply side available from various sources in the country.

Copyright Business Recorder, 2021

Rosemary C. Kearney