The Energy Ministry has revealed that the government must eliminate the Rs100 billion cross-subsidy for protected gas consumers and the Rs29 billion subsidy for RLNG diversion consumers by June 2024. Compliance with these measures is crucial for qualifying for the new $8 billion IMF Extended Fund Facility (EFF) program loan.
A senior official stated that the Petroleum Division needs to provide the audit report for Sui Southern by June 2024, addressing the reasons behind its losses and transition into a loss-making entity.
Additionally, the government is required to submit a circular debt redressal plan for the gas sector, amounting to Rs2.9 trillion, to the IMF. The IMF insists on the shift of industry-based captive power plants to the national grid by December 2024.
The introduction of the weighted average cost of gas (WACOG) and withdrawal of gas subsidy from the fertilizer sector have already been implemented, with the government increasing gas tariffs for protected domestic consumers by 40 to 65.29 percent from February 1, 2024, to mitigate cross-subsidy.
The government plans to end the Rs29 billion subsidy for RLNG diversion in the next fiscal year, recovering costs through the WACOG mode. The IMF emphasizes protecting vulnerable classes with affordable tariffs, suggesting a subsidy mechanism through the Benazir Income Support Program (BISP) or an alternative.
Concerning the circular debt redressal plan, the government aims to control the Rs2.9 trillion debt in the gas sector. While the monthly increase in existing debt has halted, the IMF demands a reduction plan to ensure biannual determinations on gas prices.
The government is set to re-engage with the IMF after the rejection of its circular debt reduction plan on February 12, 2024. In light of the IMF’s request, an audit report for Sui Southern must be submitted by June 2024 to understand the reasons behind its financial challenges.
