The Newser | Gas Prices in Pakistan raised, but Why?

Pakistan has implemented an 8.7% increase in liquefied petroleum gas (LPG) prices for October 2023, equivalent to Rs20.86 per kilogram, affecting both domestic and commercial consumers.

The new pricing, effective from October 1, 2023, establishes a rate of Rs3,080 for an 11.8 kg cylinder. This move represents the third consecutive month of LPG price hikes.

Two key factors driving this ongoing escalation are the devaluation of the Pakistani rupee against the U.S. dollar and increased prices of Propane and Butane, critical components of LPG, by Saudi Aramco. Pakistan imports LPG from various countries, including Saudi Arabia, Qatar, UAE, and Iran. The per-kilogram LPG price for October will be Rs261, up from Rs240 in September.

LPG plays a vital role in Pakistan, serving as a crucial source of cooking fuel, heating, power generation, and automotive fuel, especially in areas without access to piped natural gas. The revised pricing has varying impacts on cylinder sizes; domestic cylinders will increase by Rs246 to Rs3,080, while commercial cylinders, weighing 45.4 kg, will rise by Rs981 to Rs11,850.

Pakistan’s Oil and Gas Regulatory Authority (Ogra) has diligently calculated the producer price of LPG, accounting for factors like excise duty, petroleum levy, GST, and marketing and distribution margins, which collectively determine the final consumer prices.

Natural Gas Prices Increased

Notably, Pakistan has also recently announced a nearly 200 percent increase in natural gas prices. This would be effective from November 2023. This decision was made as it was a major demand from the IMF to reduce gas sector circular debt that has ballooned to Rs2.1 trillion. It is to be noted that in June 2023, the Oil and Gas regulator had suggested a natural gas price increase of up to 50 percent.

While these price increases are undoubtedly a matter of concern, it’s essential to track their implications on households and businesses and explore strategies for managing the impact. Amid these challenges, informed and prudent decision-making is critical for both consumers and policymakers.

It is to be noted that the other day the caretaker Petroleum Minister Muhammad Ali said that it was the huge circular debt due to which various foreign exploration and production (E&P) companies have left Pakistan, but only four are still operating in the country. He noted that by controlling the debt, the E&P activities will increase and so the production.

What is the status of ran-Pakistan Gas Pipeline Status?

An official of the Petroleum Division said that Pakistan is also negotiating on the Iran-Pakistan gas pipeline.

At diplomatic and technical levels, the authorities are in talks with Iran and also with the U.S. which is against this project and has already kept Tehran under its harsh sanctions.

The U.S.’s recent response to Pakistan’s request for a waiver is concerning. The project, initiated in 2013, has faced delays due to US and UN sanctions on Iran. Iran has rejected Pakistan’s ‘Force Majeure and Excusing Event’ notice, putting Pakistan at risk of an $18 billion penalty if the project doesn’t proceed by March 2024.

To avoid this, Pakistan is in negotiations with both Iran and the US. The Senate Standing Committee on Cabinet Secretariat, chaired by Senator Saadia Abbasi, has summoned officials from the Ministry of Foreign Affairs and the Attorney General to address concerns related to US and UN sanctions.