ISLAMABAD(National Times)- The International Monetary Fund (IMF) has appreciated Pakistan’s handling of the oil crisis without supply disruptions or an additional budgetary burden despite regional challenges during six months of the US-Iran conflict, but it asked the authorities to expedite groundwork for managing the rising gas sector circular debt and providing targeted subsidies to consumers below the poverty line.
Informed sources told Dawn that initial discussions on a proposed plan to shift gas-sector subsidies from consumer tariffs to BISP-based direct transfers had concluded that the “gas sector is far from ready given data and ownership-related challenges”.
As a result, the application of a uniform tariff linked to the average prescribed gas price of around Rs1,700 per million British thermal units (mmBtu), worked out by the Oil and Gas Regulatory Authority (Ogra), appeared premature.
The Petroleum Division, led by Minister Ali Pervaiz Malik, has been advocating uniform gas rates, as advised by Ogra, to cover the actual cost of supply, which is around Rs1,700-1,750 per mmBtu for the two gas utilities, reduce cross-subsidies from the industrial sector and curtail gas-sector debt.
The debt has now risen to around Rs3.6 trillion, including principal payables of about Rs1.8tr and an almost equivalent amount in accrued interest and late payment surcharges.
Another Petroleum Division proposal to increase the petroleum levy by a couple of rupees to finance part of the gas-sector circular debt has not found favour at relevant government forums and therefore has not been taken up with the IMF.
The introduction of a protected category for domestic consumers, involving gas prices of Rs200-350 per mmBtu, had widened the pricing gap and resultantly added to circular debt, the division suggested.
Only four of the 12 consumer slabs covered the cost of gas supply during winter, while rates remained below breakeven levels for around eight months of the year even after the imposition of substantial fixed charges.
Sources said discussions with the visiting IMF staff mission showed that documentation of gas-meter ownership and premises remained a serious problem in a large number of cases.
Consumers often avoid reporting changes in names or property ownership for decades to avoid fresh security charges and other formalities, making it difficult to identify households below the poverty line on the basis of meter data.
The problem was even more pronounced in the commercial sector, where titles often remained unchanged while premises changed hands on “pagri”.
In contrast, documentation in the power sector was considerably more advanced despite its substantially larger consumer base.
Therefore, the IMF staff is not yet convinced by the workability of the groundwork done so far, although the Fund has consistently been insisting on targeted gas subsidies and has advised further deliberations with consultants to develop a more workable mechanism over the longer term.
The Fund also acknowledged Pakistan’s management of petroleum prices without creating an additional burden on the budget or facing product shortages.
