The caretaker government of Pakistan is reportedly considering a significant increase in gas tariffs, potentially doubling them by 100%, in response to demands from the International Monetary Fund (IMF).
According to sources familiar with the matter, the IMF has urged the government to raise gas tariffs by up to 100% before the upcoming economic review in order to address the growing circular debt issue in the gas sector.
If the gas tariff is not increased, it is anticipated that an additional shortfall of Rs185 billion will be added to the already substantial circular debt in the gas sector, which currently stands at approximately Rs2,700 billion.
Additionally, sources noted that from July to September 2023, gas companies have incurred an additional Rs46 billion in losses.
A proposal for the tariff hike has been prepared and is expected to be presented at the next meeting of the Economic Coordination Committee (ECC). Prior to this, there were indications that the government intended to raise gas tariffs specifically for the fertilizer-producing sector.
Under the proposed new pricing model, gas tariffs for the fertilizer sector are set to rise to around Rs580 per MMBtu for feedstock purposes. This would result in an increase of Rs278 per MMBTu, making the new gas rate Rs1,580 MMBTu for the fertilizer-producing sector.
Negotiations for the second tranche of the International Monetary Fund (IMF) bailout are scheduled to take place in the final week of October.
