ISLAMABAD: Top mandarins of the Petroleum Division on Friday told the visiting IMF mission that the recent hike in gas tariff will help the government mop up revenue of Rs980 billion in eight months, and this is how the new flow in existing circular debt would end.
The relevant authorities of the Petroleum Division held technical level talks with the visiting IMF mission, headed by Nathan Porter. They said hike in gas tariff from November 1, 2023 would help the government collect revenue of Rs980 billion. The Fund was told with the increase in gas tariff, the new flow in the existing gas circular debt standing at Rs2.9 trillion will end in FY24, officials who were part of the meeting told The News.
It is pertinent to mention here ending the surge in existing circular debt build-up was one of the IMF conditions for the next tranche of $710 million. The caretaker regime has met the condition by making an unprecedented hike in gas tariff.
However, during the meeting, the IMF flagged the issue of decreasing tariff of CNG sector to Rs3,600 per MMBtu from the recommended Rs4,200. The government authorities told the Fund officials the newly-notified prices of CNG would not only help reduce oil import bill but would also help make the environment clean, as it is an environmentally-friendly fuel.
More importantly, thousands of people are attached to the CNG industry, and if the recommended tariff of Rs4,200 per MMBtu were applied, the CNG industry would have died and people attached would become unemployed. “We also told the IMF if the CNG tariff were increased up to Rs4200 per MMBtu, the government would have faced political and social backlash.”
The Fund people have also been sensitised about Article 158 of the Constitution. The Article states the province in which a wellhead of the national gas is situated shall have precedence over other parts of Pakistan in meeting the requirement from the wellhead, subject to the commitments and obligations as on the commencing day. “On this explanation, IMF got satisfied,” the officials claimed.
The Petroleum Division authorities will hold another round of talks with the IMF mission on the issue of OGRA’s powers, pricing mechanism of LNG and Natural Gas.
When asked if the IMF raised the issue of costly RLNG diversion to the domestic sector, officials said the government told the IMF in the winter from November 1, 2023, to February-end 2024, RLNG of Rs210 billion will be injected into the domestic sector to ensure gas availability for eight hours at three cooking times. The Rs210 billion cost would be recovered from domestic consumers in this way, the IMF was told. The IMF was also briefed on the new pricing mechanism carved out by the caretaker regime, which will not lead to an increase in the gas circular debt. “Besides we have an available budget of Rs29 billion to reduce circular debt of Rs250 billion that accumulated due to non-recovery of RLNG cost in the last four winter seasons,” they said.
