The International Monetary Fund (IMF) has urged Pakistani authorities to grant the Oil & Gas Regulatory Authority (Ogra) the authority to independently notify gas sale prices twice a financial year, based on prescribed prices. This move aims to minimize the accumulation of gas circular debt, which has surged to Rs29 trillion, according to a report by Pakistan Talk Show.
The IMF also recommended aligning the gas tariff for Captive Power Plants (CPPs) with the Re-Gasified Liquefied Natural Gas (RLNG) tariff until January 1, 2025. Under a decision approved during the caretaker regime, Ogra would have the autonomy to notify gas sale prices according to prescribed tariffs, with the government refraining from interference, except to decide on subsidized tariffs for specific consumer categories, a process that should take no longer than 40 days.
Presently, domestic gas consumers do not receive subsidies, while industrial consumers and high-end domestic consumers cross-subsidize, contributing Rs110 billion annually. The IMF has advocated for biannual gas tariff adjustments, effective from July 1 and January 1, to prevent further growth in gas circular debt, which currently stands at Rs2.9 trillion. Failure to adjust gas tariffs biannually over the past decade led to a Rs1 trillion increase in circular debt.
Regarding CPPs, the IMF has pushed for raising their gas tariff to match the RLNG tariff, citing their lower efficiency and predominance within the Sui Southern network. Additionally, the IMF has recommended connecting CPPs to the national grid electricity. Presently, CPPs pay Rs2,750 per MMBTU for gas.
Efforts to implement the Weighted Average Gas Tariff (Wacog) formula faced challenges due to constitutional issues and resistance from provinces like Sindh, Balochistan, and Khyber Pakhtunkhwa (KP). Provinces contend that RLNG imports cater primarily to Tier-II gas consumers, with the RLNG price ring-fenced. Implementation of the Wacog formula is viewed as incompatible with Article 158 of the Constitution, which grants the province producing gas the first right to use it, leading to disputes over gas pricing and allocation.