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The increase in gas prices

Hike in gas prices may hit power generation and transportation sector

Mar 26 - Apr 01, 2001

While the people were still in their half way to celebrate reduction in oil prices, the increase in gas prices dampened their happiness that due to concerns for consequent increase in electric and transportation charges as the two sectors are the major consumers of natural gas in the country.

People generally feel that on one hand the government has given relief by reducing the oil prices while in a sense it has been withdrawn in the shape of increase in gas prices.

The government has announced an increase in the prices of natural gas ranging from 14.39 to 37.39 per cent for domestic, commercial and industrial consumers.

Taking a serious note of the step, the business community has urged the Chief Executive Gen. Pervez Musharraf to intervene in the gas price hike.

Zubair Motiwala, President of Karachi Chamber of Commerce and Industry (KCCI) has urged the Chief Executive to revert the decision of gas price increase in the best interest of the national economy.

The business community has felt the pinch of the increase in gas prices so harsh that they have asked the government to take remedial measures within 48 hours. They said that if the concerned authorities fail to respond to the call of the business community they would be forced to call a general body meeting not only of the KCCI but also of all other representative trade bodies to chalk out future course of action. The higher gas and oil prices have already led to increase in production cost leaving our productions highly incompetitive in the export market. The ever-increasing cost of production have already taken the prices of the manufacturing sector out of the reach of domestic consumers, they feel. The prices of oil, gas and electricity, which are the basic ingredients for any industry have to be brought down to a reasonable level to allow the industry to survive, they said. They said that gas prices had been increased by over 50 per cent in the last 18 months. They said that this last increase in gas would adversely affect the performance of the export-oriented industry. The end result of the increase in gas prices would be a steep decline in our exports already struggling to meet the target of $10 billion set by the government.

The government claims that 40 per cent of domestic consumers would not be affected from the increase as they consume less than 100 cubic meters per month. Natural gas is being supplied to about 3.2 million domestic consumers. No increase has been made in the prices of gas being used for feed stock by the fertilizer industry.

It may be mentioned that gas tariff is being increased by the government every six months to bring its prices at par with the international level which are normally linked with the crude oil rates. The government, which is giving subsidies of Rs1 billion to domestic consumers and Rs11 billion to fertilizer industry using natural gas, a feed stock, is working on a plan to eliminate subsidy.

Consumer gas prices during the last 18 months have registered 36 to 50 per cent increases. The first increase inclusive of 15 per cent general sales tax came in August 1999, ranging from 21 per cent to 34 per cent for various consumer groups. This was followed by 15 per cent increase in July 2000.


The domestic consumers in highest consumption slab will be the hardest hit by the increase, which had been on the cards for the last three weeks.

The decision will generate additional Rs15 billion revenue in the shape of gas development surcharge as agreed with the IMF.

The latest increase in gas prices, which comes into effect immediately, has raised the fears of an upward revision in the prices of electricity.

Country's power sector is the largest gas consumer with 31 per cent share followed by fertilizer sector with 25 per cent, household with 21 per cent, industry 20 per cent and commercial sector with around 40 per cent share.

WAPDA has already moved the National Electric Power Regulatory Authority (NEPRA) for 98 paisa per unit increase on the ground that it had to increase its thermal power production this year as hydel power suffered due to shortage of water in the dams.

Domestic consumers of 100 cubic meters, the lowest slab of consumption, will not experience any increase. The second slab of 100 to 200 cubic meters per month will experience 18.33 per cent increase. Those using 200 to 300 cubic meters of gas per month will be paying 27.99 per cent more while whose consuming 300 to 400 cubic meters of gas will be paying 28.94 per cent more per month. The next slab going beyond 400 cubic meters per month will be the hardest hit and paying 37.39 per cent more.

The commercial, industrial and power sector consumers will experience 14.40 per cent increase, similarly, those who have converted their vehicles on CNG will have to pay 14.40 per cent more.