Islamabad:
On Friday, the government increased the fixed fees on gas bills by 50% and also merged gastarifers for non-residential consumers, but exposed a decision on imports of up to 500,000 tonnes of sugar due to a disagreement over huge subsidies.
The Cabinet’s Economic Coordination (ECC), which made the decisions, also approved RS2.6 trillion in additional reimbursement for repayment of domestic and foreign debt in the current financial year ending Monday.
The ECC meeting, which was held just three days before the start of the new financial year, emphasizes the challenge that the Ministry of Finance will continue in the new financial year 2025-26 due to competing requirements for non-assigned subsidies.
“The ECC suggested adjustments in the energy sector’s tariffs and decided to maintain gas prices to protect household consumers with only fixed fees adjusted in the domestic sector to recover asset costs,” according to a statement from the Ministry of Finance after the ECC meeting.
It added that the ECC allowed the price of gas for bulk consumers, power plants operating on natural gas and industry, increases with an average value of approx. 10%.
However, where the ECC did not change gas prices for consumers, it increased the fixed fees on housing consumers significantly by 50%. For the protected category of domestic consumers, the fixed taxes were increased by RS200 to the RS600.
In the non-protected category, for the monthly consumption of up to 1.5 HM3, the fixed charges were increased from RS1,000 to RS1.500. Likewise, the fixed fees for consumption of over 2 HM3 were increased from RS2,000 to RS3,000.
Prices were changed to accommodate a condition of the international currency afield to adjust gas prices.
Oil & Gas Regulatory Authority last month decided the estimated revenue requirements (ERR) for FY 2025-26 for both SNGPL and SSGCL. According to the provisions, SNGPL requires revenue of RS534.5 billion, and SSGCL requires revenue of RS354.2 billion respectively to sail through the FY 2025-26. The cumulative revenue requirements for both SUI companies are RS888.6 billion for FY 2025-26.
The law requires the federal government to ensure that the prices of consumer gas sales should not be less than the need for income set by the authority. On the current notified consumer gas sales prices, which are with effect from February 1, 2025, are the estimated revenue from both SUI companies at the end of the FY 2025-26 RS847,714 billion.
ECC approved to increase gas prices for bulk consumers by 9% to RS3160 per MMBTU. It raised rates for power plants by 17% to RS1230 and 7% for the industrial gas connections to RS2300 per year. MMBTU.
Some of the ECC members criticized giving a guaranteed 24% return on assets to SUI companies, detracting from the efforts to improve efficiency by reducing line loss.
Sugar import
The ECC could not make a decision on a proposal of up to 500,000 sugar import to accommodate the local deficiency in the future, caused by the export of 765,000 tonnes of sugar by the government of Prime Minister Shehbaz Sharif.
The ECC was told that the imported sugar included RS245 per day. Kg, which is even higher than the RS190 local price. One member of the ECC said the government should give RS85 per year. Kg of grants, which would require RS42.5 billion supplementary grants in the next financial year.
During the meeting, however, the secretary said he would neither provide subsidies nor he would seek permission from the IMF to allow such subsidies or waive the tax and duties at the import stage. Without duty and taxes, the import price in the port is RS153 per year. Kg.
Deputy Prime Minister Ishaq Dar LED committee has determined the need for imports of 750,000 tonnes of sugar due to expected deficiency in October and in the future. The ECC members urged to free the sugar market and maintain only strategic reserves of approx. 500,000 tonnes.
An official distribution of the Ministry of Finance stated that the ECC was considering a proposal brought by the Ministry of National Food Safety and research to the import of sugar to stabilize sugar prices.
The ECC approved the proposal from the Ministry of Constitution of a 10-Members Management Committee led by Federal Minister of MNFSR and including federal Minister of Trade, SAPM to the Ministry of Foreign Affairs, Secretary Finance Division, Chairman FBR and others to return to ECC with their recommendations in the case, added.
Banks’ subsidies
The Ministry of Finance stated that the ECC also discussed a summary of the finance department regarding changes in home transfers’ incentive schemes. It said ECC was tasked with the State Bank of Pakistan and Finance Division to propose and present a proper plan before July 31 to the ECC, which ensured impact assessment and a roadmap for a properly controlled transition.
The ECC was informed that banks have demanded claims of RS200 billion due to subsidies under Pakistan transfer initiatives. The Ministry of Finance has already interrupted the grant for the next financial year. The central bank representative told the ECC that SBP cannot provide any subsidy due to restrictions imposed by the IMF.
Some of the members of the ECC opposed to give up to RS6 per year. Dollar grants, which did not benefit from remitters, and instead the money went into the pockets of the commercial banks and the exchange companies. Instead, they encouraged to facilitate the manufacturing sector.
Other decisions
The ECC approved another RS15.8 billion supplementary grants to the Ministry of Defense to cover the deficit in appropriate wages and allowances, in employee-related and non-employee-related expenses and clear the outstanding taxes as part of the Prime Minister’s package for the martyrs in the recent Pak-India War. It approved another RS5.5 billion additional grants for strategic plans departments such as Rupee coverage for Pakistan Space & Upper Atmosphere Research Commission (Suparco) under CFY 2024-25.
The cabinet body also considered a summary of the Financial Division for the launch of a risk plan for small farmers and under-serving areas and awarded a principled approval of the proposal with instructions on further fine-tuning and incorporation into the additional protective measures before the planned launch on August 14, 2025.
The ECC was told that the scheme would probably bring 750,000 new agricultural borrowers into the formal financial system and generate an incremental credit portfolio of RS300 billion during its payout time of 3 years from FY 26 to FY 28.
