The government has found a new way to tackle the growing Rs 2800 billion circular debt in the gas sector. Like the power sector, the plan will shift most of the burden to gas and fuel consumers. A special petroleum levy is under consideration to collect funds for repaying loans. This levy could range from Rs 3 to Rs 10 per liter. The government plans to borrow Rs 2000 billion from commercial banks and repay it using this levy.
If Rs 1 per liter is charged, the government could collect Rs 18 billion each year. With Rs 10 per liter, it could collect up to Rs 180 billion annually. However, to repay the entire loan, the government needs to raise Rs 250 billion every year. This collection plan will continue for the next seven years. Along with the levy, an increase in gas prices is also being considered to cover the remaining debt.
The government will slowly remove the current Rs 160 billion cross-subsidy. This subsidy benefits both protected and non-protected gas consumers. It will be phased out by December 2026. From January 2027, a new targeted subsidy system will begin. The government will use Benazir Income Support Programme (BISP) data to identify and help deserving households.
The remaining Rs 800 billion debt includes interest and late payment surcharges. Some of it may be waived, while the rest may be repaid over time. A special task force is working on this plan. It includes experts from NEPRA, SECP, CPPA, and the Privatization Ministry. Retired Lt Gen Zafar Iqbal is leading the group to ensure proper execution.
The government is also reviewing the role of existing gas companies. These companies are often slow and inefficient. The task force may recommend handing over gas distribution to private firms. This could prevent future circular debt. However, raising gas prices to the average rate of Rs 1890 per MMBTU remains politically difficult. The final decision will depend on the task force’s recommendations.