Gas prices to go up 10-15% as govt aims to reduce circular debt

By
Khalid Mustafa

November 23, 2023

A representational image of a burning stove. — Unsplash
A representational image of a burning stove. — Unsplash

  • Circular debt currently stands at Rs1,250 billion.
  • Govt officials say govt is contemplating an increase in gas prices.
  • An increase of just 5% to generate Rs50 billion is likely, they add.

ISLAMABAD: The government is likely to hike gas prices by 10% to 15% in its bid to reduce circular debt that currently stands at Rs1,250 billion, The News reported on Thursday.

The decision comes after the International Monetary Fund (IMF) asked Islamabad to hike natural gas prices from January 1 next year. The lender is, however, aware of the government collecting Rs980 billion in revenue during the ongoing FY24 owing to the massive hike in gas prices by up to 193%.

"The authorities are contemplating an increase in the natural gas sale price by 10-15%, which will yield Rs100 billion in additional revenue. It is to be used for slashing the natural gas circular debt. However, the final decision to this effect has not been taken so far," senior government officials of the Energy Ministry told the publication, adding that gas prices will increase by just 5% to generate Rs50 billion.

With the massive rise in gas price by up to 193% from November 1, 2023, the government will have surplus revenue of Rs275 billion which will be consumed in paying the Rs210 billion cost to be incurred against the RLNG diversion to the domestic sector in the ongoing winter season. It also offsets the loss of Rs65 billion incurred due to the failure of the government to notify gas price hike four months late.

The gas companies, Sui Southern and Sui Northern will submit their petitions with the OGRA seeking an adjustment in gas prices from January 1, 2023, which will most probably ask for a downward revision of gas prices.

However, the Fund wants the government to further increase gas prices by 10-15% from January 1, 2024. The Fund pinpointed that the government has failed to hike the gas tariff biannually for the last 10 years since 2013, causing a massive buildup in the gas circular debt.