Islamabad: Pakistan’s gas sector circular debt has surged to Rs3.2 trillion, up from Rs2.6 trillion, primarily due to a sharp rise in Late Payment Surcharges (LPS), which now stand at Rs1.45 trillion, officials said.
Of the remaining Rs1.75 trillion, around Rs210 billion has accumulated on account of income tax and general sales tax (GST), while the actual stock of circular debt is estimated at about Rs15 billion. The government is considering waiving off the LPS, arguing that both gas suppliers—mainly exploration and production (E&P) companies—and buyers, the Sui gas companies, are state-owned entities that did not borrow from banks to incur these charges.
However, Pakistan State Oil (PSO) will be required to clear its LPS liabilities, as it relied on bank borrowing to meet payment obligations. The government also plans to eliminate Rs210 billion in income tax and GST liabilities linked to the gas sector.
To retire nearly Rs1.5 trillion in circular debt, the Task Force on Energy, in collaboration with KPMG and the Petroleum Division, has proposed a multi-pronged strategy. Key measures include imposing a petroleum levy of up to Rs5 per litre on petrol and diesel, diverting RLNG cargoes to the international market, and utilising dividends from public sector oil and gas companies after capping them at budgeted levels.
Under the plan, the diversion of 35 LNG cargoes in 2026 is expected to reduce the fuel import bill by over $1 billion and generate Rs160 billion annually for debt retirement. The proposed petroleum levy could raise around Rs90 billion per year, while dividends from state-owned entities would further support debt clearance over a five-year period.
The gas circular debt management plan was presented to the prime minister on December 31, 2025. Following this, a 17-member committee, chaired by Deputy Prime Minister Senator Ishaq Dar, was formed to review the proposal. The committee has yet to hold its first meeting and will decide on the petroleum levy rate—between Rs3 and Rs5 per litre—and the timeline for eliminating the circular debt.
Meanwhile, the government has reduced the RLNG diversion cost to the domestic sector from Rs242 billion to Rs185 billion, generating Rs57 billion in savings that were passed on to consumers. Improved recovery of gas bills amounting to Rs61 billion—Rs13 billion by Sui Northern and Rs47 billion by Sui Southern—has also helped offset a portion of past losses.
Story by Khalid Mustafa
