OGRA Recommends 26% Increase in Gas Prices

The Oil and Gas Regulatory Authority (Ogra) has recommended the federal government increase gas prices by up to 26 percent to generate approximately Rs. 847.33 billion during the current fiscal year. In two separate determinations sent to the federal government on Tuesday, Ogra proposed an average price hike of Rs. 142.45 per million British thermal units (MMBTU) for Sui Northern Gas Pipelines Limited (SNGPL) consumers in Punjab, Khyber Pakhtunkhwa, and other northern regions, reported a national daily. For Sui Southern Gas Company Limited (SSGCL) consumers in Sindh and Balochistan, the proposed increase was Rs. 361 per MMBTU. The regulator suggested that SNGPL consumers be charged a flat rate of Rs. 1,778.35 per MMBTU, up from the current Rs. 1,635.90, while SSGCL consumers should pay Rs. 1,762.51 per MMBTU, compared to the existing Rs. 1,401.25. These new rates are proposed to take effect from February 1, 2025, and aim to recover the full cost of gas to address the growing circular debt. The proposed price adjustments represent an 8.71 percent increase for SNGPL consumers and a 25.78 percent increase for SSGCL consumers. Under the revised Ogra law, the federal government is required to determine category-wise consumer rates without altering the overall revenue requirement calculated by Ogra. Any changes in consumer rates must be achieved through cross-subsidies among consumer categories or through government subsidies funded by taxpayers. Ogra warned that if the government fails to provide subsidies or adjust consumer rates through cross-subsidies, the average flat rates of Rs. 1,778.35 for SNGPL and Rs1,762.51 for SSGCL would be implemented as per the amended law, which was introduced under the International Monetary Fund’s (IMF) recommendations. The government has also committed to notifying revised gas prices effective February 1, 2025, as part of a structural benchmark agreement. The regulator highlighted significant system losses, allowing SNGPL to charge consumers for 7.37 percent of unaccounted-for gas (UFG) losses under the new rates. For SSGCL, UFG losses were set at 12.45 percent. Ogra noted that SNGPL had requested a 10.67 percent increase in average prescribed prices but was approved for an 8.71 percent hike. Similarly, SSGCL had sought a 208.67 percent increase in revenue requirements but was granted only a 25.78 percent adjustment. Ogra has asked the federal government to provide guidance on category-wise sale prices. Any revisions advised by the government will be notified by Ogra. Until then, the existing category-wise natural gas sale prices will remain in effect, the regulator said in a statement.