In a move to address circular debt and comply with International Monetary Fund (IMF) regulations, the Pakistani government has announced it will not provide gas price relief for July, despite recommendations from the Oil and Gas Regulatory Authority. Instead, rates for captive power plants (CPPs) will see a significant increase.
The Petroleum Division has confirmed that CPP gas prices will rise by Rs. 250 per mmBtu to Rs. 3,000 per mmBtu starting July 1, 2024. This increase is expected to generate between Rs. 110 and Rs. 115 billion in additional revenue, which gas companies have been instructed to use for tackling circular debt issues.
The decision comes in response to IMF criticism of CPPs’ low efficiency, which ranges from 30-35%. The international body has recommended that these plants be connected to the national energy grid by January 1, 2025, with their gas pricing aligned to RLNG rates. A further increase of Rs. 700 per mmBtu for CPP gas is scheduled for January 1, 2025.
Read More: New Drone Regulations Tighten Control on UAV Operations and Trade by Goverment
The Finance Ministry has not allocated subsidies to the Petroleum Division for the upcoming fiscal year, leaving the gas industry to manage losses through excess revenue from current gas prices. Domestic users are not currently receiving subsidies, with industrial and high-end residential consumers effectively subsidizing protected and certain non-protected consumers to the tune of Rs. 110 billion annually.
In line with IMF requirements, gas pricing in Pakistan must be adjusted every two years to prevent the accumulation of additional circular debt. This latest decision reflects the government’s efforts to balance economic reforms with the challenges of managing the country’s energy sector.
Winston Mall: please contact +92-0309-8889733 or visit https://thewinstonmall.com/
