ISLAMABAD: Pakistan’s gas sector circular debt surged to Rs3.63 trillion by June 30, 2026, as the government reviewed a proposed phased restructuring and deregulation roadmap aimed at addressing financial liabilities, reducing system losses and attracting private investment.
Thank you for reading this post, don't forget to subscribe!The roadmap was reviewed at a high-level meeting chaired by Federal Minister for Finance and Revenue Muhammad Aurangzeb on Monday. The meeting focused on improving financial sustainability, operational efficiency, consumer welfare and private-sector participation in the gas market.
According to official sources, the total outstanding circular debt comprised Rs1.848 trillion in principal liabilities and Rs1.783 trillion in late payment surcharges (LPS) at the end of June 2026.
Gas sector circular debt increased by Rs344 billion during fiscal year 2025-26, rising from Rs3.288 trillion on June 30, 2025, to Rs3.631 trillion a year later. The principal amount grew by Rs17 billion, while late payment surcharges increased by Rs327 billion.
The principal liabilities included Rs1.448 trillion in tariff differential, Rs131 billion in receivables from power companies, Rs210 billion in sales and income tax receivables, and Rs59 billion related to litigation.
Participants reviewed major structural 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 sustainable mechanism for cross-subsidies to ensure the financial viability of restructured entities.
The proposed reforms envisage a gradual transition towards a more competitive gas market, supported by effective regulation, improved operational performance and sustainable pricing mechanisms. The framework also seeks to facilitate business-to-business transactions and improve access to competitively priced gas for exporters.
Expected benefits include enhanced energy security, increased private investment, reduced fiscal and sovereign risks, more stable gas pricing and lower system losses through stronger efficiency benchmarks and performance-based incentives.
Aurangzeb emphasised the importance of aligning stakeholders around practical and implementable reforms. The proposed framework draws on international experiences, including gas-sector reforms in Türkiye and the United Kingdom, while considering Pakistan’s institutional structure, market conditions and consumer interests.
Participants also underscored the importance of carefully sequencing the reforms to safeguard security of supply, protect regulated consumers and provide a predictable environment for private-sector investment.
The proposed framework will be submitted to the Prime Minister for consideration. Further technical work and stakeholder consultations will follow to refine the reform strategy and facilitate an orderly transition.
The meeting was attended by the Federal Minister for Petroleum, 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 team.
Story by Tahir Amin
