With gas-sector circular debt exceeding Rs3.6 trillion, the government on Monday reviewed plans to restructure and deregulate the sector, including a sustainable gas-pricing mechanism to improve the financial viability of utilities amid growing reliance on imported re-gasified liquefied natural gas (RLNG). Finance Minister Muhammad Aurangzeb chaired a high-level meeting to review the proposed reform roadmap agreed with the International Monetary Fund (IMF) during the latest review under Pakistan's $7 billion Extended Fund Facility (EFF).
According to the Finance Ministry, the proposed reforms seek to establish a financially sustainable, efficient and competitive gas market while encouraging private investment, improving energy security and protecting consumers from undue price pressures. Participants reviewed key challenges, including circular debt, cross-subsidies, unaccounted-for-gas (UFG) losses and supply-demand imbalances.
They stressed the need to resolve legacy liabilities and establish a clear mechanism for addressing cross-subsidies to ensure the viability of restructured gas utilities. The proposed framework also envisages greater private-sector participation, more business-to-business gas transactions, improved access to competitively priced gas for exporters, reduced fiscal risks and lower system losses through stronger efficiency benchmarks and performance-based incentives.
The meeting discussed a phased transition towards a competitive market, drawing on international experience, including reforms in Turkiye and the United Kingdom. Participants emphasised the need to sequence reforms carefully to safeguard security of supply, protect regulated consumers and provide a predictable environment for private investment.
Aurangzeb stressed the importance of a practical and implementable reform framework aligned with the interests of all stakeholders. The proposals will be presented to the prime minister, after which further technical work and stakeholder consultations will help finalise the reform approach.
The meeting reaffirmed the government's commitment to implementing the reforms in phases to strengthen the sector's financial sustainability and operational efficiency while developing a more competitive gas market. The meeting was attended by the petroleum minister, the adviser to the prime minister on privatisation, the special assistant to the prime minister on energy, senior officials from the Petroleum and Finance Divisions, representatives of gas utilities and the World Bank.
The government's strategy focuses on long-term stability, aiming to move away from the current model that has led to massive accumulation of debt. By introducing market-based pricing and reducing the burden of cross-subsidies, the authorities hope to attract foreign and domestic investors into the energy landscape.
Furthermore, the integration of digital monitoring systems to track UFG losses is expected to play a pivotal role in the upcoming reforms. The Finance Minister noted that transparency in the gas supply chain is essential for restoring investor confidence and ensuring that the benefits of deregulation reach the end consumer.
As the country navigates these complex economic waters, the success of these reforms will depend heavily on the political will to implement difficult decisions. The collaboration with international financial institutions remains a cornerstone of this policy shift, ensuring that Pakistan stays on track with its global economic commitments.
Ultimately, the goal is to create a self-sustaining energy sector that does not rely on government bailouts, thereby freeing up fiscal space for other critical development projects across the country.