ISLAMABAD:
The Worldwide Financial Fund (IMF) is looking for to curtail powers of the federal authorities for making a downward revision in gas costs in a bid to stop additional accumulation of round debt.
In a latest assembly, the Cupboard Committee on Vitality (CCOE) was knowledgeable that the IMF whereas noticing the burgeoning tariff differential including to the movement of round debt within the gas sector in its evaluation of the Prolonged Fund Facility (EFF) and Standby Association (SBA) occasionally, sought amendments to the Ogra Ordinance 2002 to curtail powers of the federal government for pushing down tariffs.
Later, a dedication was solicited with set deadlines to well timed advise the revision in client gas costs following receipt of Ogra determinations and report compliance to the IMF.
Pursuant to the IMF’s demand, the Ogra Ordinance 2002 was amended in March 2022 by means of an enactment. It was additionally agreed that costs could be well timed revised in accordance with Ogra determinations to keep away from additional accumulation of round debt. Additionally, the diversion of re-gasified liquefied pure gas (RLNG) to the home sector was allowed with price restoration by means of price revisions beginning November 2023.
In contrast to the facility sector the place subsidy is budgeted by the federal government to deal with the tariff differential, the gas sector has operated beneath a cross-subsidy mechanism to guard the weak/poor phase within the home (residential) sector, which inflated tariffs for different client classes to satisfy income necessities of gas distribution corporations. The absence of budgeted subsidies has restricted the flexibility of public gas utilities to decrease tariffs for industrial, industrial or compressed pure gas (CNG) shoppers.
Pakistan’s gas provide chain includes two main segments – the enter price of gas or the wellhead price beneath the relevant petroleum insurance policies and the end-consumer tariff. The dedication of client tariff is the unique jurisdiction of the federal authorities beneath the Ogra Ordinance and the foundations made thereunder.
In line the present regulatory regime, Ogra, on a biannual foundation, determines and notifies each wellhead gas costs as per the relevant petroleum coverage and the income necessities of Sui corporations, which serve a bigger a part of bulk and retail shoppers related to their pipeline networks.
As soon as Ogra determines the annual income necessities of Sui corporations, it refers the choice to the federal authorities for recommendation inside 40 days for issuing a notification. The follow of revision in client gas costs in alignment with Ogra’s biannual dedication was strictly adopted till monetary yr 2013; thereafter, it was neither adopted nor any provision for tariff differential subsidy ever made within the annual price range.
On an analogous analogy, the tariff differential in ring-fenced RLNG gross sales arose beginning FY 2018-19 after the federal government determined to divert RLNG to the home sector to satisfy winter gas demand with none agency mechanism for restoration of the particular price of RLNG. The Petroleum Division, by means of advisory agency KPMG, acquired a evaluation carried out in 2024 of the money movement and round debt place within the gas/RLNG provide chain. The marketing consultant in its closing report, submitted in October 2024, confirmed {that a} main element within the gas-sector round debt was the tariff differential, which arose attributable to decrease client costs.
As of June 30, 2025, the gas-sector round debt was reported at Rs3,288 billion (together with curiosity price of Rs1,468 billion). Below the IMF’s EFF and SBA, the federal government agreed to take the next steps:
(i) Devise a exact definition of round debt for the gas sector; (ii) compile detailed and verified round debt inventory statistics; (iii) set up a month-to-month debt movement reporting system; and (iv) devise a CDMP (round debt administration plan).
Salient options of the CDMP will embrace common changes of end-user gas costs as per established formulation (and according to the Ogra Modification Ordinance efficient since March 2022) and tangible cost-reducing reforms together with measures to slash unaccounted-for-gas (UFG) losses.
The Petroleum Division beneath non-lending preparations requested the World Financial institution to help in keeping with the IMF’s understanding, particularly in making ready a definition of the gas round debt, compiling the gas debt inventory and establishing a reporting system. The World Financial institution, after months of consultations/conferences, knowledge evaluation and constructing on the work performed by KPMG, helped the Petroleum Division in arising with a exact definition of the gas round debt and the debt reporting software, which was handed over to Sui corporations in Might 2025.
A big proportion of indigenous gas provide comes from state-owned exploration and manufacturing (E&P) corporations, together with Oil and Gas Growth Firm, Pakistan Petroleum and Authorities Holdings Personal Restricted. The federal government holds the primary proper to buy all domestically produced pure gas by means of its nominated patrons, ie, Sui distribution corporations. Such gas is equipped onwards both by means of the distribution corporations or on to energy and fertiliser crops.
Owing to lower-than-expected invoice collections by Sui Southern Gas Firm and Sui Northern Gas Pipelines, coupled with power-sector points, the gas-sector round debt is steadily rising and affecting the monetary capability of E&P companies to put money into their core enterprise. If the issue of receivables shouldn’t be addressed urgently, these corporations could undergo losses and change into a burden on the nationwide exchequer.
It could be recalled that the prime minister had constituted the Committee on Implementing Structural Reforms within the Petroleum Sector. The committee finalised and shared its report with the PM Workplace on November 13, 2025. It additionally formulated a round debt settlement plan, which envisaged settlement of Rs1,493 billion over a interval of 5 years. The proposed settlement plan was introduced to the PM on December 31, 2025.
