Govt plans more gas tariff slabs

The government is likely to introduce additional gas tariff slabs to provide cheaper gas to consumers by bringing more people under the protected category net. The Cabinet Committee on Energy (CCOE) has directed the Ministry of Energy (Petroleum Division) to examine the proposal of introducing a more rational categorisation of protected consumers in the gas sector. During discussions in a recent meeting of the CCOE, chaired by Prime Minister Shehbaz Sharif, the Ministry of Energy (Petroleum Division) revealed that the evaluation carried out by the World Bank as well as advisory firm KPMG for the accumulation of circular debt in the oil and gas sectors over the last five years highlighted a substantial addition to the debt between 2019 and 2023 primarily on account of no increase in consumer gas prices and diversion of RLNG to domestic consumers. On a query, the meeting was informed that according to an agreed definition with the IMF and World Bank, the circular debt meant "net financial burdens on Sui gas companies due to policy and regulatory decisions". Also, Sui gas companies use a circular debt reporting tool developed by the World Bank to report the debt stock digitally while the components of the circular debt include tariff differentials and power companies' receivables. It was highlighted that due to lower bill collections by SSGC and SNGPL in proportion to their supplies, coupled with power-sector issues, the gas-sector circular debt had consistently increased, which adversely impacted the financial capacity of state-owned exploration & production companies to invest in their core business, which may turn those profitable entities into loss-making concerns and ultimately put a burden on the national exchequer. A list of the key factors contributing to the circular debt was shared with the CCOE, which included delayed revision in consumer gas prices (2013-22), the gap between Ogra-determined revenue requirements of Sui gas companies, low recoveries owing to the power sector, diversion of RLNG to the domestic sector in winters (2018-23), inadequate budgetary allocation for subsidies under tariff commitments, pending GST refunds with the FBR, litigation on consumer gas price notifications, demand reduction from high-yielding captive power plants and CNG stations, and the RLNG tariff actualisation effective from February 2025. The Petroleum Division shared a trajectory curve of the circular debt, showing a very sharp rise from June 2019 to June 2023 and a flatter trend from June 2023 to June 2026. The forum was also briefed on the urgent need to resolve gas bill recovery issues of SSGC in Balochistan, requiring high-level engagements. The division requested for the settlement of power-sector receivables against supplies of domestic gas, RLNG and oil; settlement of RLNG actualisation tariff of the power sector amounting to Rs42 billion; payment of Rs83 billion by the FBR in GST refunds; and budgetary allocation of Rs160 billion for the elimination of cross-subsidies in the domestic sector to provide relief to the industry for economic growth. The Petroleum Division also requested that the Finance Division may reach the closure of the ongoing discussions on the gas-sector Circular Debt Management Plan (CDMP) with the IMF, in response to which the Finance Division informed the meeting that the CDMP would be taken up with the fund during the loan programme review in September. The CCOE considered a summary titled "Circular Debt in the Gas Sector" and gave directives that issues related to the power-sector receivables, tax refunds and the budgeting of subsidy be taken up for ultimate resolution in consultation with all stakeholders.