No Relief in Gas Prices

The federal government will not reduce gas prices for all consumers, even though the Oil and Gas Regulatory Authority (OGRA) had recommended a 10 percent reduction for the upcoming fiscal year.

However, gas prices for captive power plants (CPPs) will see an increase of Rs. 250 per mmBtu, raising the cost to Rs. 3000 per mmBtu. This decision aligns with the demands of the International Monetary Fund (IMF), according to a National Daily. The government aims to generate Rs. 110–115 billion from this increase, which will be used to lower the country’s circular debt.

The Petroleum Division has instructed OGRA to ensure that the Sui gas companies use the extra revenue to help reduce the circular debt. The IMF has criticized CPPs for their low efficiency, which is between 30-35%, causing a lot of natural gas to be wasted.

The IMF has also urged the government to connect all CPPs to the national electricity grid and adjust their gas prices to match RLNG prices by January 1, 2025.

The government plans to gradually increase CPP gas prices, starting with an Rs. 250 per mmBtu hike on July 1, 2024, followed by another Rs. 700 per mmBtu increase on January 1, 2025.

Previously, the Petroleum Division asked the Finance Division for funds to reduce the circular debt, but the finance ministry did not allocate any subsidies in the budget for FY25. Instead, it was decided that the surplus from keeping current gas prices would be used to reduce losses in the gas sector.

Currently, there is no subsidy for domestic gas consumers. Industrial and high-end domestic consumers provide a cross-subsidy of Rs. 110 billion per year to support protected and some non-protected consumers.

The IMF has also required the government to adjust gas tariffs twice a year, on July 1 and January 1, to prevent further increases in the circular debt in the gas sector.

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