Punjab, the gas-starved province, is set to receive cheaper gas supplies after the Senate on Thursday passed a bill for applying the weighted average cost of gas (Wacog).
In addition, the law will help the government to reduce circular debt in the gas sector while the share of liquefied natural gas (LNG) in gas supply will increase.
At present, the share of LNG in gas supply stood at 24% in Pakistan despite the fact that different countries use only 5-6% as an ad hoc arrangement.
Pakistan State Oil (PSO) and Sui Northern Gas Pipelines Limited (SNGPL) have been burdened with a debt of billions of rupees due to the diversion of imported LNG towards the domestic sector.
At present, PSO is to receive Rs439 billion from different companies, of which SNGPL is a major defaulter on account of LNG supply.
The LNG bill of SNGPL crossed Rs100 billion over the past few winter seasons.
The company has estimated a rise of Rs50 billion in the LNG bill during the current winter season due to diversion of LNG to domestic consumers to overcome gas crisis.
Now, parliament has empowered the government to apply the weighted average cost of domestic and imported gas to ease the burden of high prices of imported gas on certain sectors and reduce the circular debt.
The government is providing subsidy on supply of LNG to five major export-oriented sectors.
Recently, the government has estimated that it will pay Rs40 billion in subsidy from January to March 2022 on LNG supply to the export-oriented sector.
In addition, there are other sectors like CNG stations and fertiliser plants that also consume LNG.
Earlier, the government tried to take provinces on board to introduce the weighted average cost, however, they refused to share the burden on Punjab consumers.
The Senate on Thursday passed the long-pending legislation to implement the Wacog system for the sale of local and imported LNG.
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Minister for Energy Hammad Azhar, while informing through his official Twitter account, said, “Wacog bill has been passed by the Senate. It is a historic and long-pending reform that will ensure energy security of Pakistan.”
“We are now able to embark upon the reform of the gas pricing structure, remove anomalies and enhance supplies of imported gas.”
This reform is as significant as the approval of IGCEP (Indicative Generation Capacity Expansion Plan) for power purchase a couple of months ago.
Both historic reforms in the power and petroleum sectors have been carried out by the PTI government in the last six months, said Azhar in a tweet.
Published in The Express Tribune, February 18th, 2022.
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