As winter approaches, ensuring an uninterrupted gas supply becomes a top priority. In response to past challenges, the government has taken a bold step by diverting Rs. 210 billion worth of Re-Gasified Liquefied Natural Gas (RLNG) to the domestic sector.
This move aims to guarantee eight hours of gas availability for residential consumers. But what’s the catch, and why is it necessary? Let’s dive into the details.
Addressing Past Issues
In previous winters, the government grappled with unresolved RLNG diversions, contributing to the mounting gas circular debt, reaching a staggering Rs. 2,900 billion.
To prevent a further increase in this debt, the decision was made to recover the Rs. 210 billion cost of RLNG diversion from consumers through a new pricing mechanism established by the caretaker regime.
This move marks a critical effort to address lingering issues and ensure a more stable energy supply during the winter season.
The New Pricing Mechanism
The Energy Ministry’s senior official confirmed that the cost of RLNG diversion would be collected through the new pricing mechanism, preventing a gas circular debt surge.
Additionally, there’s a budget of Rs. 29 billion available to mitigate the existing circular debt of Rs. 250 billion accumulated due to the non-recovery of RLNG costs over the past four winter seasons.
This new mechanism aligns with OGRA guidelines for cost recovery through gas companies’ revenue requirement petitions, assuring a more financially sustainable approach.
IMF Benchmark Met
The IMF had urged the government to charge ring-fenced RLNG prices to all consumers to prevent further circular debt buildup. The caretaker government has heeded this call by implementing OGRA Ordinance guidelines.
Challenges and Demand
With local gas production decreasing annually by 9-10 percent, the government faces the dilemma of diverting RLNG to maintain eight hours of gas availability or dealing with potential shortages.
Spot bidding and imports from the open market have become necessary to bridge the demand gap, ensuring a total availability of 1000 mmcfd during December.