In a significant move, the government is set to introduce the Weighted Average Cost of Gas (WACOG) mechanism to determine gas tariffs, blending local natural gas with imported RLNG. This initiative aims to reduce gas tariffs for various sectors in Punjab, high-end domestic consumers, and RLNG-based power plants, according to senior officials of the Energy Ministry.
Prime Minister Shehbaz Sharif has formed an 11-member committee to finalize recommendations on the implementation of WACOG in gas tariffs. The committee includes the Minister of Petroleum as convener, along with members from the Ministries of Power and Industries, as well as secretaries from the Power Division and Industries and Production. The four provincial chief secretaries will also be part of the committee, with the Petroleum Division secretary serving as its secretary.
The committee has been given seven days to assess the implications of introducing WACOG in gas tariffs, including its impact on gas system liquidity/efficiency, circular debt, and various sectors such as domestic power, industrial (including fertilizers), and commercial and captive power sectors.
The committee’s terms of reference also include proposing a technology-based system for direct subsidies to farmers by the provinces to mitigate the impact of WACOG on the agricultural sector and productivity.
This move underscores the government’s commitment to addressing gas tariff issues through modern and efficient mechanisms, although challenges and potential opposition from gas-producing federating units such as Sindh, Balochistan, and KP are expected due to potential increases in gas prices for certain regions.
Story by Khalid Mustafa
