Gas Tariff Hike to Bring New Wave of Inflation

The recent gas tariff hike for domestic consumers and general industries approved by the Economic Coordination Committee (ECC) could escalate inflation by 45bps.

According to a report by Arif Habib Limited, the total direct weight of gas price in the National CPI basket is 0.7 percent. An increase in gas price for five quintiles by an average of 54 percent means inflation could escalate by 45bps.

However, the second-round effect of an increase in gas prices would be much higher as industrial users like fertilizer, textile, cement, steel, chemical, and general industries will gradually pass on the impact going forward.

With the inflation level at 12.2 percent during FY22, the report estimates the average CPI for FY23 to clock in at 18.3 percent year-on-year (YoY).

The Economic Coordination Committee (ECC) had approved gas tariffs for domestic consumers and general industries with an increase ranging from 8 percent – 235 percent.

The move was instigated by the latest Determination of Estimated Revenue Requirement for SNGP and SSGC (the year 2023), whereby OGRA has put into effect two bills passed earlier in the year pertaining to the gas sector

It is pertinent to mention here that the summary for the gas price hike sailed through the ECC last week but it is yet to be approved by the Cabinet.

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