ISLAMABAD : The Economic Coordination Committee (ECC) of the Cabinet is all set to approve increase in natural gas prices for protected consumers upto 56 per cent, non protected upto 28 per cent, power 25 per cent and bulk 6 per cent from July 1, 2025, sources close to Petroleum Minister told Newzshewz.
” There is also increase of fixed charge of Rs 150 in protected category and Rs 400 in non- protected category. The minimum bill for protected and non-protected consumer to be calculated at the first tariff slab of each category,” the sources added.
Sharing the details, sources said, M/s Sui Southern Gas Company Ltd (SSGCL) and Sui Northern Gas Pipelines Ltd (SNGPL) are public sector gas utility companies having licenses from Oil & Gas Regulatory Authority (OGRA) for purchase, transmission, distribution and sale of gas to consumers in the country. OGRA determines annual revenue requirements of both Sui companies in accordance with the respective license conditions, Natural Gas Tariff Rules 2002 and Section 8 (1) and (2) of the OGRA Ordinance 2002.
Pursuant to Section 8(2) of the OGRA Ordinance, 2002, the Authority, in its decision of May 20, 2025 has issued determination of Estimated Revenue Requirements (ERR) for FY 2025-26 for both SNGPL and SSGCL respectively. According to the determinations, SNGPL requires a revenue of Rs. 534.458 billion and SSGCL requires a revenue of Rs. 354.180 billion to sail through the FY 2025-26 respectively. The cumulative revenue requirements of both the Sui companies are Rs. 888.638 billion for the FY 2025-26.
According to Section 8(3) of the OGRA Ordinance 2002, Federal Government is required to advise OGRA revision in the category-wise consumer gas prices within 40 days of the determination i.e., by or before June 28, 2025 so that revised tariff becomes effective from July 01, 2025. Further, the amended Section 8(3) of OGRA Ordinance, 2002 (amended through enactment in March 2022) mandates Federal Government to ensure that the consumer gas sale prices so advised are not less than the revenue requirement(s) determined by the Authority. At the current notified consumer gas sale prices effective February 01, 2025 the estimated revenues of both Sui companies by end FY 2025-26 are Rs. 847.714 billion (SNGPL: Rs.493.536 billion and SSGCL: Rs. 354.178 billion) .
OGRA in its determination of ERR FY 26 while taking into account the previous years’ revenue shortfall of SSGCL owing to no / inadequate gas price revisions made by the Government (gas circular debt) has allowed Rs. 34 billion as adjustment in the revenue requirements which implies that no price revision or increase required for the consumers of SSGCL whereas SNGPL faces a revenue shortfall of Rs. 41 billion due to RLNG diversion, curtailment of gas from indigenous gas fields due to RLNG surplus and demand destruction in captive power plants.
Under the IMF Program, a Structural Benchmark (SB) was agreed by the Government wherein captive power plants were to be disconnected by 31.01.2025. However, later the said SB was revised in December, 2024 and it was agreed to increase existing tariff of captive power plants to RLNG equivalent and also impose a power grid transition levy through a legal enactment. Pursuant to said directions, tariff for captive power was revised from February 1, 2025 and captive power levy was imposed through ‘Off the Gird (Captive Power) Levy Act, 2025. These two actions led to demand destruction in captive power plants and for SSGC projected sales reduction in the existing determination is from 180 mmcfd to 75 mmcfd and for SNGPL the reduction is from 175 mmcfd to 35 mmcfd.
Petroleum Division is of the view that unlike tariff revision process followed by NEPRA in power sector, the process for OGRA determination of revenue requirements is biannual which leads to carry-over of revenue deficits in the Final Revenue Requirements.
At FRR stage no advice from Federal Government is required under the existing from work thus any deficit arising at the end of financial year after actual sales forms part of gas circular debt. As per the Natural Gas Tariff Regime, 2018 the deficit in FRR should be carried forward in next determination of revenue requirements which is required to be followed to stop the accumulation in the gas circular debt. Further, OGRA Ordinance, 2002 does not bind the Authority for number of revisions in the revenue requirements on account of change in wellhead gas prices and cost of imported gases. Now since the cost of imported gas is being determined on monthly basis by OGRA, therefore, it is imperative to adjust the change in the cost of imported gases at least on quarterly basis to improve the recoveries and payments at the end of Sui Companies Considering the past revisions made in the consumer categories other than domestic sector, the room to revise prices is only available in the domestic sector slabs wherein a huge cross-subsidy is involved which is estimated at Rs. 168 billion per annum at current prices. Government is already engaged with IMF under the Resilience Sustainability Facility (RSF) to replace cross subsidies with direct/budgeted subsides in commensuration with income levels of the domestic consumers under the social program i.e., BISP. As per the Reform Measure, the framework for replacing the cross subsidy with direct subsidy would be developed by June 2026 following the model being pursued by Power Division which is expected to be rolled out in 2027.
Accordingly, Petroleum Division has worked out option whereby revision in the gas tariff as well as fixed charge has been proposed, however, in order to lower the impact of price revision in domestic sector, the revision in bulk domestic, industry (process) and power sector (which is unchanged since Feb-2023) has also been proposed. The proposed revisions in gas tariff are estimated to meet Rs. 41 billion revenue deficit of SNGPL and would also generate Rs. 31 billion surplus for SSGCL which would be utilized to meet prior revenue shortfalls of SSGCL which are hovering at Rs.565 billion.
Foregoing view, Petroleum Division has submitted following proposals for consideration of the ECC: (i) revision in gas tariff proposed for domestic slabs and other categories ;(ii) OGRA to consider the cushion of surplus, if available in revenues, in meeting the prior year shortfalls / circular debt at the time of review of estimated revenue requirements ;(iii) OGRA to be advised to allow carry-forward of revenue deficits arising at the time of FRR in the next determination of the revenue requirements as per provisions of Natural Gas Tariff Regime 2018 ; and (iv) t direct OGRA/Cabinet Division to make amendments in OGRA Ordinance, 2002 for quarterly tariff adjustments to ensure timely recoveries before the next biannual determination in December, 2025.
The summary was circulated to Finance Division, Power Division, Planning Division, Industries & Production Division and OGRA. A consultative meeting with all stakeholders was also held on June 21, 2025. The Industries and Production Division in their comments have stressed upon the impact of increase of gas tariff for industry (process) which will impact the objectives of National Tariff Policy 2025-30, therefore, they have requested for reconsideration for revision of gas tariff for industry. Planning Division has supported the proposals. However, they have suggested to revisit the 24% Return on Assets (RoA) allowed to Sui companies which may be linked with gas sales volume and reduction in unaccounted for gas (losses). OGRA in their comments have in- principle supported the summary regarding Federal Government proposal for revision in sectoral natural gas sale prices. The fixation of category-wise consumer gas sale prices is the sole prerogative of Federal Government whereby Federal Government is obligated to advise gas prices in such manner that the revenue requirement as determined by OGRA for SNGPL and SSGCL is fully met. OGRA has supported the proposal for elimination of cross subsidy and disbursement of direct subsidy to the domestic consumers with low-income levels.
Power Division in their comments have highlighted that revision in gas tariff for power plants will have impact of increase in power tariff by Rs. 0.10/kWh. Further, the proposed increase will relegate the gas-based power plants lower than imported fuel plants in merit order which would have impact of $ 140 million at import of coal for power generation. Finance Division has endorsed the proposal, in principle, however, they have suggested to review the fertiliser gas tariff instead of industry tariff .They have suggested to improve operational efficiency by reducing UFG losses. Finance has inquired whether demand side intervention through lifting of moratorium on new gas connections can address issues of surplus RLNG.
