Pakistan considers new gas tariff slabs to expand protected consumer category

The Pakistani government is considering the introduction of additional gas tariff slabs to expand the protected consumer category, aiming to provide lower gas rates to more households. This proposal follows a directive from the Cabinet Committee on Energy (CCOE), chaired by Prime Minister Shehbaz Sharif, which instructed the Petroleum Division to review consumer classifications to help mitigate rising circular debt in the gas sector.

Evaluations by the World Bank and KPMG indicate a significant increase in circular debt between 2019 and 2023. Key drivers include delayed gas price revisions, gaps between revenue requirements and actual tariffs, the diversion of RLNG to domestic consumers during winter months, inadequate subsidy allocations, and pending GST refunds. Other contributing factors include litigation over gas prices and declining demand from CNG stations and captive power plants.

To address these financial pressures, the Petroleum Division has requested the settlement of Rs42 billion in RLNG actualization charges owed by the power sector, Rs83 billion in GST refunds from the Federal Board of Revenue, and Rs160 billion in budgetary support to eliminate domestic cross-subsidies. The Gas Sector Circular Debt Management Plan is expected to be discussed with the IMF during the September loan program review.