November 23, 2022
  • November 23, 2022

Rising electricity and gas prices signal further inflation

By on June 4, 2022 0

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After the National Electric Power and Regulatory Authority (NEPRA) on Thursday increased the base electricity tariff by Rs. 7.91/kWh for the next financial year, the Oil and Gas Regulatory Authority (OGRA) has announced on Friday a 45% increase in natural gas prices, triggering a new wave of inflation on the general public in the coming months.

According to a statement released by NEPRA, it has increased the base electricity tariff, currently at Rs. 16.91/unit – to cope with a recent spike in fuel prices, capacity costs and impact of the devaluation on the Pakistani rupee. He said the power purchase price for the next financial year was estimated at Rs. 1,152 billion, while capacity charges – including National Transmission and Dispatch Company and power transmission cost high-voltage direct current electricity – have been projected at Rs. 1,366 billion.

According to NEPRA, the total revenue requirement of the distribution companies has been estimated at Rs. 2,805 billion, with projected sales of 113,001 GWh. Industry experts say the decision would also help the government meet International Monetary Fund requirements, a necessity to revive a suspended bailout program and avoid the possibility of default. “The tariffs determined have been communicated to the Federal Government and the uniform tariff thus determined by NEPRA after incorporating the amount of subsidies/surcharges, suggested by the Government of Pakistan, is forwarded for notification,” he added.

OGRA rates

On Friday, OGRA also approved a 45% revenue requirement increase for Sui Northern Gas Pipelines Limited (SNGPL) and a 44% increase for Sui Southern Gas Company (SSGC), effective July 1. According to a notification, the gas price for SNGPL consumers has been increased from Rs. 266.58/MMBTU to Rs. 854.52/MMBTU, while the price for SSGC consumers has been increased from Rs. 308.53/MMBTU to Rs. 1,007.82/MMBTU.

The regulator also clarified that the previous years’ deficit, valued at Rs. 264.894 million, had been referred to the federal government for proper policy decision and was not taken into account in the current determination.

Inflationary leap

The notification from NEPRA and OGRA came as the Pakistan Bureau of Statistics (PBS) released last week’s inflation data, revealing that the Sensitive Price Index (SPI) rose 2% , mainly due to higher energy and food prices.

According to PBS, the year-on-year increase in the SPI was 20.04%, with prices for 28 essential items rising last week from the previous week. He said the SPI increased by 1.02% for the lowest income group – those earning less than Rs. 17,732/month) – and by 2.44% for those with monthly incomes above Rs. 44,175. He stated that of the 51 items studied, the prices of 28 increased; five decreased; and 18 remained unchanged.

The government had announced the Rs. 30 increase in the prices of petroleum products last week, and the impact of this policy decision would only become visible next week. Likewise, the second round of price increases announced this week would not become fully visible until the following week. Observers have warned that inflation data is likely to rise due to these price increases in the weeks and months ahead.