# Govt Moves to Amend Gas Surcharge Law as Sector Circular Debt Surpasses Rs3.5tr
**ISLAMABAD:** The federal government is seeking comprehensive amendments to the decades-old **Gas Development Surcharge (GDS)** law to strengthen recovery from defaulting consumers, address instances where gas is sold below cost and close regulatory gaps that have contributed to the gas sector’s circular debt exceeding **Rs3.5 trillion**.
Petroleum Minister **Ali Pervaiz Malik** is scheduled to present the **Natural Gas (Development Surcharge) (Amendment) Bill, 2026** in the National Assembly on Monday, according to the assembly’s agenda for August 17. The proposed legislation aims to bring the **Natural Gas (Development Surcharge) Ordinance, 1967** in line with the modern regulatory framework introduced after the establishment of the **Oil and Gas Regulatory Authority (Ogra)** in 2002.
According to official sources, the GDS was originally introduced to collect the differential margin generated when consumer-end gas prices exceeded the prices prescribed by the regulator. The proceeds are transferred to the provinces under the **1990 National Finance Commission (NFC) Award**.
However, the existing law has failed to keep pace with changes in the gas market, particularly when governments delay revisions to consumer tariffs.
Such delays can result in a **“negative GDS”**, or negative differential margin, when the price charged to consumers falls below the actual cost of gas. The current legal framework does not provide a formal mechanism to recognise or recover this negative margin, while positive GDS is distributed among provinces based on their gas production.
The regulatory gaps have also resulted in repeated audit objections regarding the timelines and discretion exercised by gas utilities in settling GDS payments, as well as the accumulation of **late payment surcharge (LPS)** liabilities.
The Petroleum Division is additionally concerned about a substantial backlog of GDS receivables, comprising outstanding principal amounts and late payment surcharges. A significant portion of these liabilities is reportedly linked to dedicated power plants affected by the broader circular debt crisis in the power sector.
With gas-sector circular debt now exceeding **Rs3.5 trillion**, the government is seeking to overhaul the legal framework governing the surcharge.
The proposed bill would amend the definitions of **“sale price”** and **“prescribed price”** and formally align them with Ogra’s statutory framework. It would also introduce legal definitions for **“negative differential margin”** and **“late payment surcharge”**, creating a formal mechanism to account for and recover financial shortfalls arising when consumer gas tariffs remain below the prescribed cost.
The proposed amendments are intended to improve recovery, strengthen financial discipline in the gas sector and address longstanding regulatory and accounting gaps contributing to the accumulation of circular debt.
Story by Khaleeq Kiani
