Pakistan’s gas sector is facing a critical financial crisis as circular debt in the industry has surged to Rs3.283 trillion. Lawmakers warned that mounting losses at state-run utilities could destabilize the system and place further burden on consumers.
Rising Debt Threatens Gas Industry Stability
The disclosure was made during a National Assembly Standing Committee on Petroleum session, highlighting the deep-rooted financial stress across the supply chain. Committee members emphasized that rising debt, coupled with inefficiencies, could collapse the gas distribution system without immediate reforms.
Director General Gas, Abdul Rasheed Jokhio, stressed that the sector’s circular debt reflects structural weaknesses and calls for urgent intervention. Lawmakers discussed options including structural reforms and potential privatisation of the two main gas distribution companies to improve efficiency.
Losses at State-Run Utilities
Managing Director of Sui Northern Gas Pipelines Limited (SNGPL), Amir Tufail, reported progress in reducing theft and leakage losses, known as unaccounted-for gas (UFG), to 5.27% in FY25, slightly above FY24’s 4.93%. Despite these improvements, SNGPL’s annual financial losses remain around Rs30 billion, with UFG totaling roughly 30 billion cubic feet (BCF) per year.
Similarly, Sui Southern Gas Company (SSGC) has reduced its losses from 17% to 10%, approximately 29 BCF annually. Balochistan remains the largest contributor to these leakages. Lawmakers noted that combined annual losses of SNGPL and SSGC, totaling around Rs60 billion, ultimately impact consumers through higher tariffs and reduced service efficiency.
Calls for Reform and Privatisation
Committee members highlighted that gas utilities are not a core government function and suggested privatization as a solution. Gul Asghar Khan emphasized the need to transfer operational control to private entities to improve efficiency. Naveed Qamar warned that without meaningful reforms, circular debt could destroy the companies entirely.
Chairing the session, Syed Mustafa Mehmood cautioned that any privatization should avoid monopolistic control. He stressed the importance of maintaining competition while protecting consumer interests.
Development Funding and Mineral Potential
In a separate briefing, the Petroleum Division requested Rs4.72 billion in development funding for the next fiscal year. Projects include an explosives tracking system, geological surveys, and initiatives by the Hydrocarbon Development Institute of Pakistan.
Officials also revealed that lithium reserves have been identified in Gilgit-Baltistan and Kotli, presenting opportunities for mineral exploration. These findings come even as the gas sector continues to grapple with financial strain and operational inefficiencies.
Conclusion
Pakistan’s gas sector faces an urgent need for structural reform, efficiency improvements, and financial oversight. Rising circular debt threatens both the stability of state-run utilities and the affordability of gas for consumers. Strategic interventions, including potential privatization and investment in new infrastructure, are crucial to safeguarding the industry’s future.
