Gas Circular Debt Hits Rs 3.283 Trillion

Pakistan’s gas sector circular debt has escalated to approximately Rs 3.283 trillion, according to briefings given to parliamentary standing committees, underscoring deep-rooted financial stress across the gas supply chain. Officials warned that continued accumulation of liabilities could materially impair the operational stability of state-owned utilities and ultimately translate into higher end-user tariffs.

During proceedings before the National Assembly Standing Committees on Energy and Petroleum, Director General (Gas) Abdul Rasheed Jokhio outlined that the circular debt figure reflects persistent structural imbalances, including revenue shortfalls, delayed recoveries, and cost-recovery gaps. Lawmakers expressed concern that absent structural reform, mounting liabilities may weaken public sector balance sheets and intensify fiscal exposure.

The Managing Director of Sui Northern Gas Pipelines Limited (SNGPL), Amir Tufail, reported that unaccounted-for gas (UFG) losses stood at 5.27% in FY25, compared to 4.93% in FY24. Although this remains below the benchmark prescribed by the Oil and Gas Regulatory Authority (OGRA), the financial impact is substantial. SNGPL estimates annual losses of roughly Rs 30 billion, with UFG volumes approximating 30 billion cubic feet per annum.

Representatives of Sui Southern Gas Company (SSGC) informed the committee that their loss ratio has declined from 17% to 10%, equivalent to nearly 29–30 billion cubic feet annually. Balochistan was identified as a significant source of system leakages and theft. SSGC similarly incurs annual financial losses estimated at around Rs 30 billion due to theft and operational inefficiencies.

Parliamentarians observed that combined annual losses of the two gas utilities — approximated at Rs 60 billion — are effectively passed through to consumers via tariff adjustments. Allegations were raised that certain industrial consumers may be involved in theft or irregularities, while the resulting financial burden is recovered from domestic users. Regulatory officials acknowledged that even losses falling within OGRA’s permissible threshold are recoverable through tariffs and noted that technically advanced systems may still record up to 6% UFG losses.

The debate extended to structural reform options, including privatisation. Some committee members argued that gas distribution does not constitute a core sovereign function and should be opened to private sector management to enhance efficiency. Others cautioned that unchecked circular debt could further deteriorate corporate viability if governance and pricing reforms are deferred. The committee chairman stressed that any privatisation framework must prevent monopolistic concentration and incorporate consumer protection safeguards.

Separately, the Petroleum Division sought Rs 4.72 billion in development allocations for the upcoming fiscal year. Proposed initiatives include an explosives tracking and monitoring system, expanded geological surveys, and projects under the Hydrocarbon Development Institute of Pakistan. Officials from the Geological Survey of Pakistan also apprised lawmakers that lithium reserves have been identified in Gilgit-Baltistan and Kotli, signalling potential strategic mineral development opportunities.

In parallel discussions, a subcommittee was informed that the Hyderabad Electric Supply Company (HESCO) will submit its business plan to the National Electric Power Regulatory Authority (NEPRA) prior to April. Members further requested a status report on the relocation of a 132kV grid station and raised questions regarding transparency and utilisation of energy training funds collected by petroleum sector entities.

For stakeholders in the energy and tax advisory space, these developments highlight escalating contingent liabilities, regulatory pass-through mechanisms, and potential restructuring measures that may materially affect tariff frameworks, subsidy allocations, and future privatisation policy.