Pakistan’s government has announced a 9% increase in gas rates for industrial captive power units, effective from July 1st. This decision, taken during a special meeting of the Economic Coordination Committee chaired by Finance Minister Muhammad Aurangzeb, aligns with prerequisites set by the International Monetary Fund for a three-year loan program.
The adjustment specifically targets gas sale rates to captive plants in the general industry, elevating them from Rs 2,750 to Rs 3,000 per million British thermal units. Notably, this increase excludes consumers and gas tariffs for other users until December 31st, 2024, preserving current pricing for non-industrial sectors.
The government’s move also withholds a previously anticipated 15% reduction in gas rates, amounting to Rs 133 billion, which was originally intended to alleviate financial pressures on consumers amidst inflation and new taxes. The Oil and Gas Regulatory Authority recommended redirecting these funds towards addressing circular debt, prioritizing financial stability over consumer relief.
Looking forward, the agreement with the IMF mandates the closure of captive power plants from the gas grid by January 2025, posing forthcoming financial challenges. It is anticipated that further adjustments in gas rates will be necessary at that time to offset potential revenue shortfalls.
Recent history shows successive increases in gas tariffs, including significant hikes in November 2023 and February of this year. These adjustments have been aimed at meeting fiscal demands and fostering economic stability amid broader economic challenges.
This decision underscores Pakistan’s commitment to meeting IMF conditions while navigating economic challenges, with implications for both industrial and consumer sectors.
