LAHORE: Under pressure from international lenders, the government is likely to peg gas prices to the BTU value of oil soon. The move will increase gas prices for all types of consumers by an alarming 500 per cent from the current average sale price of Rs320 to about Rs1,600 per million BTU.
According to sources in the ministry of petroleum and natural resources, the IMF, World Bank and ADB are pressing the government to make British Thermal Unit of oil a benchmark for gas prices and the government, finding no way out, is getting ready to concede.
The sources said that if gas prices were linked to the BTU value of oil, the average sale price for domestic consumers would jump from the current Rs200 per mmbtu to Rs1,000. For industry and commercial users, the average sale price will go up from Rs382 mmbtu (currently being sold by Sui Northern Gas Pipelines Ltd) to Rs1,910 mmbtu.
The same will apply to the CNG sector, but the impact may be a little less because its price is already quite high. The lenders are of the opinion that all sources of energy should be made part of ‘one basket’ and their prices be linked to their BTU (heat) content which should then be pegged to international oil price.
The sources said that both Sui Southern and Sui Northern were already selling gas according to its BTU content, but linking the content to import price of oil was a harsh proposal. “To make the matter worse, the government is getting ready to approve the proposal at huge political and social risk,” they added.
An SNGPL official said that if the government accepted the lenders’ demand it would have to answer two basic questions — whether people and economy would be able to sustain this increase and was it ethical to link the price of a domestic commodity to international prices.
“Addition of each rupee to the price encourages theft and corruption in the billing and collection system. This kind of raise would simply fail the company because no one would pay,” he warned.
He said the government should also realise that the impact would not only be limited to gas price for domestic and industrial consumers. It will include electricity tariff because most of the new generation plants are gas-based and older ones are being converted to gas because of the price advantage.