Pakistan hikes gas prices to curb soaring circular debt

The Pakistan government has raised the gas price for industries and electricity-generating units to stall the circular debt, which has risen to almost 2.5% of the country's gross domestic product (GDP).

The country's apex decision-making body — the Economic Coordination Committee which decides key financial matters like price fixing, export and import permissions — allowed gas companies, Sui Northern Gas and Sui Southern Gas, to increase gas prices effective July 1.

The country announces gas prices on a bi-annual basis after agreeing with the International Monetary Fund to pass on any increase in gas prices to eliminate subsides in the energy sector.

Moreover, the ECC decided to announce gas prices on a quarterly basis so any adjustments are implemented quickly to reduce the circular debt.

The circular debt currently stands around PKR 2,900 billion ($10.5 billion), an official of the Ministry of Energy said.

Gas price is set to rise by 7% to PKR 2,300/mmbtu for industries and 16.6% to PKR 1,050/mmbtu for electricity-generating units, according to a government document received by Nukta on Sunday.

The gas price for commercial users, fertilizer-feed & fuel, cement companies, electricity generation plants set up at export units, and compressed natural gas pumps remains unchanged.

The gas price for residential consumers also remains unchanged but fixed charges on all segments have been raised by 50%.

The government has increased the fixed charges on gas bills by 50% to PKR 600/bill, the notification said.

Moreover, for the non-protected households with consumption of 1.5 cubic meters, fixed charges have been raised from PKR 1,000 to PKR 1,500 per bill while for non-protected consumers with usage exceeding 1.5 cubic meters, fixed charges have been increased by PKR 1,000 to PKR 3,000.

In the past, the government shied away from raising the gas price, protecting residential and industrial consumers, which resulted in piling of the debt as companies were purchasing gas at higher rates but selling them under cost to avoid public criticism, said Rao Amir, deputy head of research at Arif Habib Ltd., a Karachi based securities company.

However, since last two years, the authorities have been passing on the gas price to end-consumers, containing the debt volume of the gas sector, Amir said.

Electricity generation

Electricity generation from gas-fired plants dropped by 20% to 883 Gwh in May compared with 1,110 Gwh of the same month last year, data from the National Electric Power Regulatory Authority showed. The generation in 11 months of the current fiscal year was unchanged at 10,251 Gwh.

The share of electricity from gas-fired plants dropped to 7% last month, down from 9% of same month last year, the data said.

In May, electricity generation from multiple avenues amounted to 12,755 Gwh compared with 12,618 Gwh in May 2024.