How Pakistanis are Affected By Government’s Refusal to Give Relief in Gas Prices

The federal government has chosen to maintain current gas prices across all categories starting July 1, 2024.

This decision contrasts with the recommendation by the Oil and Gas Regulatory Authority (OGRA) to decrease prices by 10% for the upcoming fiscal year.

Captive Power Plants Face Increased Costs

Despite the freeze in general gas prices, captive power plants (CPPs) will experience a significant hike. Their prices will rise by Rs. 250 per mmBtu to Rs. 3000 per mmBtu, aligning with demands from the International Monetary Fund (IMF).

This adjustment aims to generate between Rs. 110 to 115 billion in revenue, earmarked for reducing the country’s circular debt.

Addressing Inefficiencies and Economic Impact

The decision underscores concerns over the efficiency of CPPs, which currently operate at 30-35% efficiency, leading to substantial natural gas wastage.

The IMF has urged the government to integrate CPPs into the national electricity grid by January 1, 2025, and to synchronize their gas prices with RLNG.

Government Strategy and Financial Implications

The Petroleum Division has instructed OGRA to utilize the additional revenue from CPPs to alleviate circular debt pressures. This move is part of broader efforts to stabilize the energy sector finances without direct subsidies from the finance ministry in the FY25 budget.

Future Adjustments and Policy Mandates

CPP gas prices are set to increase further by an additional Rs. 700 per mmBtu starting January 1, 2025.

The IMF’s directive for biannual tariff adjustments aims to curb the escalation of circular debt, ensuring a more sustainable economic approach in Pakistan’s gas sector.

Impact on Consumers

While industrial and affluent domestic consumers will continue to cross-subsidize, with net contributions totaling Rs. 110 billion annually, the lack of subsidies for domestic gas consumers may lead to cost implications for households.

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