New increases in electricity and gasoline prices in Pakistan - Energy

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  • Media circulates news of the imposition of increases in electricity and gasoline prices in Pakistan
  • The Minister of Finance denies imposing a current increase, while reconsidering according to international variables
  • Imran Khan’s government accused of being behind 80% of Pakistan’s debts
  • The International Monetary Fund loan requires the removal of energy subsidies
  • Electricity prices are expected to increase by 7.14 rupees/unit

An unknown fate awaits the prices of electricity and gasoline in Pakistan, after the statements of the government headed by Shahbaz Sharif reflected a state of confusion between the approval and denial of price increases.

At a time when the local media reported that the government had imposed new increases in the prices of electricity and gasoline, the Minister of Finance, Miftah Ismail, denied these increases.

The move to impose the new increases is seen as a government response to the conditions of the International Monetary Fund, in an attempt to resume discussions of Islamabad receiving a package of loan tranches of up to 6 billion dollars.

Increase in electricity and petrol prices in Pakistan

On Saturday, May 14, local media reported, confirming the government’s imposition of new increases in electricity and gasoline prices in Pakistan, in light of the turmoil in the country’s energy sector.

Electricity and gasoline prices in Pakistan
Fuel pump in Pakistan – Photo courtesy of The Times of Islamabad

The rate of increase in electricity and gasoline prices announced at the time was estimated at 7.14 rupees/unit over the base price of electricity, under the Extended Financing Facility of the Fund’s program estimated at up to $6 billion.

The conditions of the IMF include raising fuel prices by raising gasoline prices.

While an official clarified that the real increase in electricity prices is Rs 4.79/unit, but after taking into account the fuel price differential system considerations, another increase of 2.35 rupees/unit is added, The Brent newspaper quoted the International News as saying.

(Pakistani rupee = 0.0052 US dollars)

government confusion

The Pakistani Finance Minister, Miftah Ismail, denied the government’s intention to raise the prices of petroleum products at the present time, but he redressed in a tweet to him on the social networking site “Twitter”, indicating the possibility of reconsidering the decision not to increase the current one soon; In view of market changes and international oil prices.

Ismail pledged to hold talks with the IMF to find common ground that represents a middle way out of the crisis, local newspaper The Express Tribune quoted him as saying.

He believed that the government will receive the blame during all scenarios, whether if it raises the prices of electricity and gasoline in Pakistan and others in response to the conditions of the fund, or maintains the current price levels, and then loses the loan segments that it is waiting for to repay its debts.

Ismail blamed the previous government headed by Imran Khan for standing behind 80% of Pakistan’s total debt.

Confused scenarios talking about increases in electricity and gasoline prices in Pakistan did not include diesel prices, as it will continue to enjoy the cover of government support, at a time when Islamabad is preparing to resume consultations with the International Monetary Fund, next Wednesday.

Government options..no way

The move to impose new increases on electricity and gasoline prices in Pakistan aims to reduce the cost of support allocated to them in the current budget until the end of the fiscal year in June, as the government costs in light of the current prices a subsidy bill of 140 billion rupees.

The government needs to increase the fees imposed on gas – too – to ensure that Soi Northern and Soy Southern Gas overcome their liquidity crisis.

In addition to these financial burdens, the government needs up to 200 billion rupees to pay the allocations to gas companies and utilities, which raises its financial burden bill to 701 billion rupees.

With regard to fuel prices, expectations indicate that the cost of fuel subsidies will be recorded at approximately 118 billion rupees if oil prices in Pakistan remain at their current levels, before any increases in electricity and gasoline prices are made in Pakistan.

In light of the measures that the government must take to provide the financial allocations required to meet its obligations, a new challenge is emerging before it, which is that 30 million families fall under the “Benazir” income support program, which requires providing them with support mechanisms.

The government aimed to renew consultations again with the IMF to rescue the Pakistani rupee (the local currency) from its lowest level ever against the US dollar, by strengthening foreign reserves and supporting the economy.

Rescue tracks

Increase in electricity and petrol prices in Pakistan
Electricity towers in Pakistan – Photo courtesy of Daily Pakistan

Islamabad is seeking to follow parallel paths that will allow it to get out of the bottleneck of the energy crisis, especially since the growth in demand for gas, electricity and gasoline in Pakistan coincides with the high cost of energy subsidy bills and the government’s need to pay huge dues.

Earlier this month, the National Electricity Regulatory Authority of Pakistan “Nebra” had agreed to amend electricity fees under the “Fuel Cost Adjustment” system and charge them to the consumer on electricity bills for the month of May.

Meanwhile, the government is expanding the provision of additional supplies of electricity through renewable sources, so as not to fall prey to supply shortages, while it plans to increase electricity and gasoline prices in Pakistan.

The south Asian town is also seeking to overcome the crises of gas shortages and the high prices of liquefied gas imports, through shipments of spot contracts and tenders, especially as it meets one-fifth of the demand for electricity.

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