Move to curb circular debt flow: Proposal seeking 10pc cut in gas sale prices rejected

ISLAMABAD: In a move to curb circular debt flow, the federal government rejected a proposed up to 10 percent decrease in indigenous gas sale prices for consumers and raised tariffs for Captive Power Plants starting July 1, 2024.

This decision comes despite the Oil and Gas Regulatory Authority (OGRA) recommending up to 10 per cent decrease in prescribed gas prices, which would have amounted to a Rs150 per unit reduction.

The government aims to bring down circular debt in the energy sector by not passing on the proposed price cut to consumers.

On Tuesday, Ali Pervaiz Malik, Minister of State for Finance and Revenue stated in a press conference that various sectors of the economy have been cross-subsidised from raising rate of Captive Power Plants.

The state minister further said that the proposed 10 per cent reduction in gas prices means Rs150 per unit reduction. He said the government reduced circular debt flow to zero by not passing on the OGRA recommendations.

On May 24, 2024, the OGRA determined the revenue requirements of Sui companies for fiscal year 2024-25. The average prescribed price per MMBTU of gas is recommended as Rs1,635.90 and the decrease in price per MMBTU is Rs179.17 with a decrease percentage of 10 per cent for SNGPL.

The financial impact of previous years’ shortfall of Rs580,585 million, as calculated by OGRA as against SNGPL’s claim of Rs862,612 million per the petition, has been referred to the federal GOVERNMENT for an appropriate policy decision and is, therefore, not made part of the instant determination.

The average prescribed price for SSGC is determined as Rs1,401.25 with a decrease in price per MMBTU is Rs59.23 and the decrease percentage is four per cent.

The regulator requested the government for advice on category-wise sale prices.

Copyright Business Recorder, 2024