Pakistan is preparing a major overhaul of its gas sector through a new Multi-Year Tariff framework. The proposed reforms aim to improve financial sustainability and create a more competitive energy market.
The tariff system will use the Regulatory Asset Base and Weighted Average Cost of Capital. It will also introduce regulatory methods for the Transmission System Operator, Distribution System Operator and Regulated Gas Sales. The proposal forms part of the Gas Sector Transition Roadmap. A high-level steering committee presented the roadmap to Petroleum Minister Ali Pervaiz Malik.
Government Plans Gas Sector Restructuring
The roadmap aims to address structural weaknesses and reduce Pakistan’s growing circular debt. It also proposes a gradual shift toward deregulation and market-based competition.
Under the plan, Sui Northern Gas Pipelines Limited and Sui Southern Gas Company Limited would undergo unbundling.
Their operations would separate into gas transportation entities and trading companies. The trading business would then divide into Regulated Gas Sales and Competitive Gas Sales.
Regulated Gas Sales would continue serving domestic consumers under regulatory oversight. Meanwhile, Competitive Gas Sales would gradually adopt market-based pricing for commercial and industrial users.
Gas Market Could Open to Private Sector
The proposed Gas Market Release Programme would initially auction 20% of gas volumes to private participants. The government would then release another 10% annually over the following two years.
The roadmap also recommends cost-reflective tariffs and targeted subsidies. Instead of broad subsidies, support would focus on eligible low-income households.
Additionally, authorities could introduce a single-rate pricing system. This would gradually replace the existing slab-based tariff structure.
Measures to Address Circular Debt
The government is also considering a dedicated holding company to manage existing gas-sector receivables and liabilities.
Furthermore, the reforms would require amendments to the OGRA Act and related regulations. These changes could cover licensing rules, transmission codes, distribution codes and third-party access regulations.
A policy directive approved by the Council of Common Interests and federal cabinet would formally begin unbundling and market liberalisation. However, implementation will require regulatory approvals, legal changes and stronger institutional capacity. Coordination with provincial governments, gas companies and OGRA will also remain essential.
The World Bank has supported development of the proposed framework. If implemented effectively, the reforms could reshape Pakistan’s gas market and strengthen its long-term financial stability.
