The federal government has opted not to reduce gas tariffs starting July 1, despite the Oil and Gas Regulatory Authority’s (Ogra) decision to cut gas prices by 10% for the upcoming fiscal year, according to a report by The News on Tuesday.
Instead, following guidelines from the International Monetary Fund (IMF), the government will increase gas prices for captive power plants (CPPs) by Rs250 per mmBtu, raising the rate to Rs3,000 per mmBtu from the current Rs2,750 per mmBtu.
Senior officials from the energy ministry informed the publication that, except for CPPs, the government intends to maintain the current gas prices. This strategy aims to generate a surplus revenue of Rs100-115 billion after fulfilling the necessary revenue requirements for the next financial year.
“The surplus revenue will be used to gradually reduce the existing circular debt, which has surged to an enormous Rs2,900 billion. Past years’ losses have accumulated to Rs1,500 billion,” the officials stated.
Additionally, the Petroleum Division has instructed Ogra to ensure that Sui gas companies use the surplus revenue to lower the circular debt.
This decision aligns with the IMF’s assertion that CPPs, particularly those in the Sui Southern network, waste a significant amount of natural gas, with inefficiency rates of 30-35%. Consequently, the IMF has recommended that the government connect all CPPs to the national electricity grid.
