Energy Minister Credits Painful Gas Price Hikes Amidst Challenges


In Islamabad, Outgoing caretaker Minister for Power and Petroleum, Muhammad Ali, reflected on recent “painful” gas pricing reforms as one of the administration’s significant accomplishments, despite acknowledging the hardship it brought to consumers. During his departure address, he also conceded the government’s inability to negotiate debt relief with foreign independent power producers (IPPs), particularly those from China, throughout the caretaker period.

Ali emphasized the critical role of stabilizing the exchange rate in making gas and electricity affordable for consumers, particularly in the industrial sector. While the caretaker government couldn’t provide immediate relief through lower prices, it implemented policy measures to enhance gas supply from unconventional sources and improve cash flows for exploration and production companies and gas utilities, aiming to reduce import dependence and foreign exchange losses.

Addressing electricity tariffs, Ali outlined a plan for tariff rationalization, aiming to reduce cross-subsidies, which currently amount to Rs473bn. This move is pivotal for industrial growth, as it directly impacts export potential and foreign exchange inflows, thereby stabilizing the exchange rate. He highlighted the importance of competitive trading models in providing electricity at sustainable rates, contingent upon currency stability.

The minister acknowledged the unresolved issue of renegotiating debt tenors with Chinese IPPs, citing a total payable of Rs511bn. Despite this challenge, he noted that the painful gas pricing reforms, implemented in two phases, succeeded in mitigating circular debt accumulation, although the overall circular debt in the energy sector remains a daunting Rs2.3 trillion.

Ali also highlighted achievements in gas supply enhancement, with an additional 152 million cubic feet per day (mmcfd) injected into the system, addressing longstanding issues. He expressed optimism for an additional 280 mmcfd expected to bolster supply in the coming year.

In conclusion, the outgoing minister underlined the complexities faced by the caretaker government in the energy sector, emphasizing the importance of sustained efforts to address challenges and ensure stability in energy pricing and supply.

Story by Khaleeq Kiani

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