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Fixing gas sector

Gas circular debt tops Rs3trn as the state weighs taxing all citizens to cover sectoral failures

Editorial January 08, 2026 1 min read

Pakistan's gas sector has quietly become home to yet another fiscal monster. Circular debt has crossed Rs3 trillion, including late payment surcharges. Yet, instead of addressing the structural inefficiencies that created this crisis, the state appears poised to once again pass the burden onto citizens through taxes.

At a recent meeting of the National Assembly's Standing Committee on Petroleum, Petroleum Minister Ali Pervaiz Malik confirmed the scale of the gas sector's circular debt. He also made it clear that, on the prime minister's instructions, gas tariffs would not be raised from January 1, despite Ogra recommending up to a 7% increase to meet nearly Rs886 billion in revenue requirements for FY26. That decision may provide short-term political relief, but the alternative under consideration — increasing the petroleum development levy (PDL) by around Rs5 per litre on petrol and diesel - is hardly defensible. This is where the policy contradiction becomes stark.

There are roughly 10 million gas consumers in the country. Petrol and diesel, on the other hand, are consumed by almost the entire population, directly or indirectly. Using a higher PDL to plug the gas sector's financial holes effectively spreads the cost of inefficiency across the whole population, many members of which have little or no connection to the gas network. The PDL has already been stretched beyond recognition, standing at Rs82 per litre.

What makes this approach particularly problematic is that the sources of the gas sector's losses are well known. Unaccounted-for gas, theft, leakage, weak governance and collusion have long plagued the system. Citizens are unjustly told to bear the burden. If the government is serious about fixing the gas sector, it must resist the temptation to raise the amount of taxes and levies and instead solve the root problems plaguing the industry.

COMMENTS (2)

Ameer | 6 hours ago | Reply These people won t cut down there expenses of government in half by reducing staff and departments and divisions as recommended by Dr. Kaiser Bengali what else are they going to do.

Muhammad Arif | 10 hours ago | Reply Few phrases dominate Pakistan s energy discourse as persistently and as misleadingly as circular debt. It is invoked as though it were a settled economic concept an unavoidable structural defect inherent in supplying gas and electricity in a developing economy. In policy debates media commentary and official statements circular debt is treated almost as a natural phenomenon costs rise prices are politically constrained arrears accumulate and the cycle repeats. This framing may be convenient but it is fundamentally wrong. Circular debt is neither a textbook concept nor an economic inevitability. It is a locally coined term that has gradually come to obscure rather than explain the real problem. The most entrenched misconception is that circular debt is caused by underpricing of gas and electricity. This claim does not survive even a cursory examination of Pakistan s tariff regime. Over the years regulators have allowed virtually every conceivable cost component to be passed through to consumers. These include inefficiencies unaccounted-for losses unjustified operating expenditures financing costs exchange-rate losses and even late-payment surcharges arising from utilities own failure to pay suppliers on time. As a result gas and electricity tariffs in Pakistan are among the highest in the region. When prices already reflect all approved costs the argument that debt accumulates because prices are too low becomes untenable.

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