ISLAMABAD(National Times)- Amid over Rs3.44 trillion circular debt in the gas sector, the government has missed its July 1, 2026 deadline for notifying the biannual gas tariff as required under structural benchmark of the International Monetary Fund (IMF) under the $7bn Extended Fund Facility (EFF).
Under two new gas sector structural benchmarks, Pakistan has committed to notifying semi-annual gas tariff adjustments on July 1, 2026, and February 15, 2027, to maintain energy tariffs at cost-recovery levels. The successful third EFF review in April this year introduced 11 new structural benchmarks, including those related to the energy sector.
Senior government officials said the gas tariff notification, effective from July 1, was originally delayed due to legal questions surrounding the appointment of Establishment Secretary Nabeel Ahmad Awan as the acting chairman of the Oil and Gas Regulatory Authority (Ogra). His appointment on an acting-charge basis was challenged in court and was further complicated by volatile global energy prices, a key ingredient for determining gas tariffs. As a result, the Mr Awan-led Ogra had to postpone and later hold public hearings on the revenue requirements of the gas utilities. Under the Ogra law, the government is required to work out the consumer-end gas tariff within 40 days of the regulator’s determination of the annual revenue requirements of gas companies through the prescribed gas prices.
UFG reduction targets
The officials said Ogra had subsequently completed procedural and legal requirements for working out revenue requirements, including targets for the reduction in unaccounted-for-gas (UFG) losses.
“The gas tariff determination is ready and can be issued today,” an official said. However, he added that the acting chairman — a serving Pakistan Administrative Service officer — did not agree to opaque UFG reduction targets and wanted management commitments with a documented strategy for each gas custody transfer station (CTS) in both the Sui Southern and Sui Northern network systems.
Under its commitment to the IMF, the government is working to reduce circular debt pressures and UFG by improving gas system tracking and enforcement, as well as upgrading ageing infrastructure.
Sui companies used to commit to annual UFG reduction targets, which remained unimplemented or were only partially achieved and reversed over time, hovering between nine per cent and 14pc.
Based on business as usual, the determination could have been issued in the second week of June.
The new chairman, however, wanted the UFG reduction targets to be CTS-specific and how they could be curtailed on an overall basis. The companies sought a month-long period to commit to such detailed targets.
“It is a technical breach of the SB as it would be subsequently covered through revenue adjustments,” an official said. He added that Ogra would soon issue its determination and that the government would waste no time in working out consumer-end tariffs instead of waiting for 40 days.
The government and the IMF had reached consensus as part of the EFF that achieving energy sector viability was key to maintaining macroeconomic stability. “We commit to continuing to do so through timely tariff increases that recover costs and prevent a recurrence of circular debt,” Finance Minister Muhammad Aurangzeb had committed to the IMF in the agreement.
Under the IMF agreement, the government is working to enhance coordination and data sharing with power sector counterparts under the newly established integrated energy planning framework and the Cabinet Committee on Energy.
The government has now developed a comprehensive dashboard featuring sub-components and drivers of circular debt, which amounted to Rs3.442tr by the end of December 2025, and has initiated a quarterly gas circular debt flow reporting system. A new Circular Debt Management Plan for the gas sector will be rolled out during the current fiscal year after necessary approvals.
