Gas tariff increase fails to cut Pakistan’s Rs2.8 trillion circular debt pile

ISLAMABAD: The gas sector circular debt crisis, which affects key state-run entities such as PSO, SSGC, SNGPL, and OGDCL, is unlikely to ease despite a recent hike in gas tariffs, a senior official said on Wednesday.

Abdul Rasheed Jokhio, Director General (Gas) of the Petroleum Division, told a parliamentary panel that the tariff adjustment, aimed at stabilising the circular debt, would only keep it at the current level without any significant reduction.

"The recent increase in gas tariffs will help maintain the circular debt at the current level, however, it will not result in any reduction in circular debt," Jokhio said.

The circular debt within the oil and gas sector has surged to a staggering Rs2.8 trillion, with Rs2.08 trillion being the principal amount, he added.

In late October, the caretaker government approved a substantial natural gas tariff increase of up to 172 percent for various consumer categories, effective from Nov. 1. This was the second gas tariff hike in 2023, following a January increase of up to 112 percent.

Earlier this month, Sui gas companies sought approval from the Oil and Gas Regulatory Authority (OGRA) for a possible up to 137 percent increase in prescribed gas prices for SNGPL and 15.38 percent for SSGC. These state-run companies also asked for a hefty rise in security deposits for gas consumers.

The Senate Standing Committee on Petroleum, which met here with Senator Mohammad Abdul Qadir in chair, received a comprehensive briefing on strategies to address the mounting circular debt. The panel also discussed the shortfall of urea in the country.

Jokhio said Pakistan's daily gas consumption was 4,000 million cubic feet per day (mmcfd), exceeding the production of 3,000 mmcfd. Local consumers used 950 mmcfd, while fertilizer companies, namely FFC and Engro, consumed nearly 750 mmcfd, split as 350 mmcfd and 250 mmcfd, respectively.

Marri Petroleum supplied about 85 percent of the gas used by fertilizer companies, while the rest came from other sources.

Senator Qadir expressed concern that despite receiving subsidized gas, fertilizer companies failed to address the urea and DAP shortfall, and directed the ministry to provide production details against gas consumption.

He stressed the energy crisis as a major national challenge, resulting in a $32 billion import bill and also suggested that the ministry explore newly discovered sites to mitigate this crisis.

The committee also addressed the imposition of flat rates for gas consumers in Balochistan. DG Gas clarified that uniform tariff rates applied nationwide, but consumers in colder regions experienced higher charges due to increased gas usage in winter. Senator Mohammad Abdul Qadir proposed relaxing gas rates for consumers in cold areas during winter to facilitate necessities.

Furthermore, the committee discussed recent gas tariff increases for local consumers. DG Gas clarified that the protected category, encompassing 57 percent of consumers, remained unaffected by the tariff adjustments. Senator Mohsin Aziz raised concerns about the pricing of indigenous gas for different sectors. Senator Mohammad Abdul Qadir proposed a formalized policy for LNG importation by private parties to meet local demands, requesting detailed information in the next meeting.

Regarding the committee's recommendations, officials assured that they had been adopted, with a comprehensive report to follow upon completion.

The committee also addressed gas load shedding in Abdullah Gabol Goth during peak hours. Officials explained that low-pressure issues in the area would be resolved with the approval of a 754-meter pipeline, along with separate pressure regulation, for Rs16.4 million.

On the matter of regularizing contingent employees in the SUR Range Project of Pakistan Minerals Development Corporation, officials reported that the issue was sub judice and pending before NIRC, while employees continued their work in the corporation.

The meeting was attended by Senator Saadia Abbasi, Senator Fida Muhammad, Senator Mohsin Aziz, Special Secretary for Petroleum Division Bushra Aman, Chairman OGRA Masroor Khan, and other senior officials from relevant departments.