In a significant move aimed at meeting International Monetary Fund (IMF) conditions, the federal government of Pakistan has announced a hike in gas prices for captive power plants (CPPs). Effective from July 1, 2024, the new rate will be Rs3000 per mmBtu, up from the current Rs2750 per mmBtu.
This decision, part of broader fiscal measures, comes despite the Oil and Gas Regulatory Authority (OGRA) recommending a 10% reduction in gas prices to provide relief to the public. The government, however, opted against this proposal, citing the need to address the burgeoning circular debt, which has ballooned to Rs2,900 billion.
Revenue Generation and Debt Mitigation
By increasing the gas prices for CPPs, the government aims to generate an additional Rs110-115 billion. This revenue is crucial for mitigating the existing circular debt crisis and ensuring the financial stability of the Sui gas companies. The Petroleum Division has expressed confidence that this move will significantly contribute to reducing the debt burden.
Compliance with IMF Conditions
The price hike is part of a phased approach to align the gas prices for CPPs with Re-gasified Liquefied Natural Gas (RLNG) prices by January 1, 2025. The IMF has stipulated this alignment as a condition for Pakistan to secure another bailout package, which is essential for the country to avoid default.
In the initial phase, effective July 1, 2024, gas prices for CPPs will increase by Rs250 per mmBtu. A subsequent increase of Rs700 per mmBtu scheduled for January 1, 2025, bringing the total price to Rs3700 per mmBtu. This strategic adjustment expected to meet the IMF’s demands and support Pakistan’s economic stabilization efforts.
Public Impact and Future Outlook
While the decision to maintain current gas prices for all other consumers provides some relief to the general public, the increased cost for CPPs may have downstream effects on industries relying on captive power generation. The government assures that these measures are necessary steps towards financial reform and debt reduction.
The strategic alignment of gas prices with global standards reflects Pakistan’s commitment to fulfilling international financial obligations and securing economic stability. As the country navigates these challenging fiscal waters, the focus remains on balancing immediate economic needs with long-term financial health.
 conditions, the federal government of Pakistan has announced a hike in gas prices for captive power plants (CPPs). Effective from July 1, 2024, the new rate will be Rs3000 per mmBtu, up from the current Rs2750 per mmBtu.){kind=link}