Pakistan Increases Gas Prices for Industries to Meet IMF Requirements
Islamabad [Pakistan], July 1: The government of Pakistan has raised gas prices for industrial captive power units by approximately 9%, effective from July 1. This decision was made to comply with a key requirement from the International Monetary Fund (IMF) and was approved during a special session of the Economic Coordination Committee (ECC), chaired by Finance Minister Muhammad Aurangzeb.
The petroleum division stated that notifying consumer gas prices on July 1 was a prior action agreed upon with the IMF, while phasing out captive power plants from the gas grid by January 2025 is a structural benchmark. This move blocks a proposed 15% reduction in gas rates due to lower international oil prices, which would have amounted to PKR 133 billion.
The Oil and Gas Regulatory Authority (Ogra) had initially planned a PKR 180 per unit reduction in gas prices for the fiscal year 2024-25. However, the funds were redirected to manage circular debt instead of providing relief to consumers facing inflation and new taxes.
The ECC’s decision increases the gas sale rates for captive plants within the general industry, raising the tariff to PKR 3,000 per million British thermal units (mmBtu) from the previous PKR 2,750. This is expected to generate increased revenues. The Sui Northern Gas Pipelines Ltd and Sui Southern Gas Company Ltd had estimated revenue requirements for fiscal 2025 totaling PKR 897 billion, with current projections indicating revenues exceeding PKR 1.025 trillion.
The decision impacts 349 industrial units operating captive power plants with 523 gas connections, which significantly contribute to national exports. The petroleum division highlighted the challenge of meeting revenue shortfalls expected between January and June 2025, amounting to PKR 47 billion, following the commitment to phase out captive power units by January 2025.
Earlier adjustments to gas tariffs in February, which included increases of up to 35%, were part of broader efforts to stabilize energy markets amidst economic reforms. Finance Minister Aurangzeb remarked that the decision aims to align energy policies with fiscal imperatives while balancing industrial growth and consumer affordability.
Looking ahead, stakeholders anticipate ongoing discussions with the IMF on additional structural benchmarks, including broader fiscal reforms and energy sector transparency. The finance minister concluded that the decision reflects a commitment to fiscal prudence and economic resilience amidst evolving global economic dynamics.
