Energy minister announces moratorium on new gas connections, adding government will now prioritize industry over domestic consumption
The government will be implementing a nationwide increase in the base tariff of electricity and will no longer be entertaining any new gas connections, Energy Minister Hammad Azhar announced on Friday.
Addressing a press conference in Islamabad, he said the base tariff would be increased by Rs. 1.39/unit, with effect from Nov. 1. This decision, he said, was taken during a meeting between the World Bank and Finance Minister Shaukat Tarin that he attended via video-link. He claimed that effectively this would result in a net tariff increase of Rs. 1.1/unit, as it was expected that a negative quarterly adjustment of 15-24 paisa per unit would be implemented around the same time.
Per routine—and despite having been in power over 3 years of a 5-year tenure—the minister sought to blame previous governments for the decision to increase the power tariff. He claimed that if the Pakistan Muslim League (Nawaz) government hadn’t set up “expensive” power projects beyond the country’s needs, the rates could have been maintained lower. “Yet, we have not increased tariff as much as the international lending institutions insisted,” he said, without acknowledging that the finance minister had earlier vowed to not implement any new tariff increase until 2022.
Summarizing the circular debt situation, Azhar claimed that capacity payments for power projects set up by the previous government had been responsible for it spiraling out of control. He said the circular debt had stood at Rs. 185 billion in 2013, was increased to Rs. 470 billion in 2018, and had hit Rs. 700-800 billion currently. It is projected to hit Rs. 2,500-3,000 billion by 2030, he said, and appeared to take credit for the PTI government not initiating any new projects.
The energy minister—without providing any concrete figures—claimed the government had improved recoveries and reduced losses over the past two years. However, he said, there remained a difference of Rs. 1.5-2/unit between the cost of power production and the consumer tariff. He said the National Electric Power Regulatory Authority (NEPRA) had wanted to increase the power tariff by Rs. 3.35/unit in March, but the government had restrained it to Rs. 1.95/unit. The remaining Rs. 1.39/unit being applied now, he claimed, would not be applicable to consumers using less than 200 units per month.
This, he said, accounted for almost 46 percent of consumers and would facilitate the masses.
Azhar also praised the government’s decision to eliminate peak rates and provide power consumption to industries at a fixed rate of Rs. 12.96/unit, claiming this had increased consumption by 15 percent. The government, he said, is planning a similar seasonal tariff for domestic and commercial consumers wherein they would receive discounts on consumption in excess of past usage. This, he said, would help reduce the reliance on natural gas, as people would utilize electricity for heating in winter.
Announcing that the government was imposing a moratorium on the installation of new gas connections for domestic consumers, he said this was motivated by depleting domestic gas flows and expensive imported gas. He said the government was undertaking legislation to implement weighted average cost of gas of both imported and local gas. “Until we have additional gas pipeline capacity and quantities, we will not announce network expansion and resumption of new connections for just few seats unlike the previous government,” he said. Instead of the domestic sector, said Azhar, the government would now be prioritizing gas supply for the fertilizer sector.
Responding to concerns of a looming gas shortage due to the government’s failure to secure spot cargoes of LNG, the minister claimed that the gap was not too great. “Gas loadshedding would more or less be the same as last year,” he claimed, adding that long-term deals would ensure the minimum requirements would be met.