Islamabad: The Economic Coordination Committee, chaired by Finance Minister Muhammad Aurangzeb, convened on Sunday and approved the recommendation from the Petroleum Division to maintain current gas prices, dismissing a proposed 10% reduction slated by the Oil and Gas Regulatory Authority (Ogra) from July 1, 2024.
Additionally, the ECC sanctioned an increase in gas prices for captive power plants (CPPs) from the existing Rs2,750 per mmBtu to Rs3,000 per mmBtu, following the Petroleum Division’s proposal. This adjustment aligns with directives from the International Monetary Fund (IMF), which set a deadline of January 1, 2025, for bringing CPP tariffs in line with the ring-fenced cost of RLNG.
These decisions are pivotal as part of the government’s commitments under the IMF’s upcoming staff-level programme, estimated between $6-8 billion. The ECC anticipates generating a surplus revenue of Rs110-115 billion after meeting necessary revenue targets for the next fiscal year. This surplus will be strategically used to gradually reduce the current circular debt burden, which has ballooned to Rs2,900 billion, with accumulated losses in previous years amounting to Rs1,500 billion.
The Petroleum Division conveyed to Ogra the imperative to utilize the surplus revenue for reducing circular debt within Sui Gas companies. The IMF contends that CPPs, predominantly located within the Sui Southern network, operate with an efficiency rate of 30-35%, resulting in significant natural gas wastage. To address this, the IMF advocates integrating CPPs into the national electricity grid to optimize their operational efficiency and reduce gas consumption.
In accordance with these recommendations, the ECC decided to implement a phased increase in gas prices for CPPs, starting with Rs250 per mmBtu from July 1, 2024, and an additional Rs700 per mmBtu effective from January 1, 2025, to meet the IMF’s stipulated deadline.
The ring-fenced cost of RLNG, pivotal in these deliberations, currently stands at Rs3,700 per mmBtu. Furthermore, the IMF has instructed the government to undertake gas tariff adjustments biannually, effective from July 1 and January 1, to preempt any future spikes in gas circular debt.
