Debt from gas circulars expected to surge by Rs 275b
A Senate committee issued a warning on Wednesday, stating that the circular debt in the gas sector could surge by Rs275 billion if gas prices were not increased. The Senate Standing Committee on Petroleum, led by Senator Mohammad Abdul Qadir, highlighted that the sector faced a Rs65 billion shortfall in July due to delayed price adjustments.
Officials from the petroleum division of the energy ministry informed the committee that domestic consumers needed to shift to LNG during winter. They emphasized that failure to make this transition would result in an inability to provide gas to domestic consumers for eight hours during the season.
The Director General (gas) mentioned a projected revenue shortfall of Rs210 billion due to outstanding recoveries and the supply of LNG to the domestic sector. Consequently, he asserted that increasing gas prices was the only viable option.
The committee was further informed that the circular debt in the gas sector was escalating by 40%, reaching Rs2.1 trillion. Officials cited the Oil and Gas Regulatory Authority (Ogra), which had set the loss limit for the gas sector at 7%. Gas companies were permitted an annual loss of Rs15 billion. The officials noted that IMF restrictions on subsidies in the budget necessitated an inevitable increase in gas prices to meet financial requirements.
The Ogra chairman acknowledged the inevitability of a gas tariff hike and attributed the rising prices to contracts for local gas wells signed in the past. Gas supply agreements at lower prices in the past contributed to the current price increase, he explained. The DG (gas) informed the committee that the country produced 3,000 mmcfd of gas locally, with an average price of Rs1,217 per MMBtu.
Expressing concern over escalating petrol and gas prices, committee members questioned the frequent increases. The DG (gas) clarified that the tariff for protected domestic consumers had not been raised since January 1.
The convener of the panel highlighted the current circular debt in the gas sector at Rs2.1 trillion, with the DG (gas) noting a combined revenue shortfall of nearly Rs700 billion for the two Sui companies. This deficit, he emphasized, would be addressed by raising gas prices.
Additionally, the committee was briefed on the gas supply to the country's fertilizer plants. Officials disclosed that there were 10 fertilizer factories with an annual composting capacity of 6.8 million metric tons. These factories, which use electricity and gas for fertilizer production, were receiving 740 mmcdf of gas. The officials assured the committee that none of the fertilizer plants were closed, and the gas supply continued to all of them.
