Ministry seeks govt support for cross-subsidy

Looks to provide tariff relief to sectors funding subsidy for domestic consumers

ISLAMABAD:

The Petroleum Division has sought budgetary support from the federal government to bear the cost of cross-subsidy for the domestic sector in a bid to provide relief for other gas consumers.

It has projected a cross-subsidy of Rs160 billion for the protected gas consumers in financial year 2026-27. The demand was placed in a recent meeting of the Cabinet Committee on Energy (CCoE), chaired by Prime Minister Shehbaz Sharif.

Sources told The Express Tribune that the Petroleum Division sought budgetary support to provide cross-subsidy to the residential consumers so that tariff relief could be offered to other sectors of the economy like industries, commercial businesses, compressed natural gas (CNG) filling stations, cement producers and bulk domestic consumers.

It also sought the support of CCoE for settlement of legacy arrears for indigenous gas/liquid fuel supply to power producers, and settlement of re-gasified liquefied natural gas (RLNG) actualisation tariff for the power sector.

It called for settlement of general sales tax (GST) refunds pending with the Federal Board of Revenue (FBR) and resolution of unaccounted-for-gas/ gas theft/ recovery issues of Sui Southern Gas Company (SSGC) in Balochistan through the constitution of a political committee.

For FY2026-27, the estimated gas cross-subsidy shows significant differences across consumer categories. Protected domestic consumers are paying Rs200-350 per million British thermal units (mmBtu). These consumers are projected to receive the largest subsidy, with a combined deficit of Rs161.9 billion, including Rs81.2 billion for Sui Northern Gas Pipelines Ltd (SNGPL) and Rs80.7 billion for SSGC.

In contrast, the non-protected domestic consumers are paying Rs500-4,200 per mmBtu and they are likely to generate a surplus of Rs12 billion, while bulk consumers, by paying Rs3,175 per mmBtu, will contribute a surplus of Rs21.2 billion.

Roti tandoor (bread oven) consumers are paying a gas price of Rs700 per mmBtu and they are projected to cause a deficit of Rs4.7 billion.

Similarly, fertiliser consumers (Engro and Fauji Fertiliser), are paying Rs1,597 per mmBtu and they will account for a deficit of Rs5.9 billion, while the power sector covering Engro, Genco-II, K-Electric and SNPC, at a gas cost of Rs1,225 per mmBtu, will cause a deficit of Rs7.8 billion. However, Liberty Power, paying Rs2,888 per mmBtu, is anticipated to contribute a surplus of Rs5 billion.

Among the higher-rate paying categories, cement consumers are paying a gas price of Rs4,400 per mmBtu and they are expected to generate a surplus of Rs1.9 billion, commercial consumers at Rs3,900 per mmBtu may create a surplus of Rs14 billion and CNG consumers at Rs3,750 per mmBtu could provide a surplus of Rs31.3 billion.

Processing industry consumers are paying Rs2,300 per mmBtu and are projected to contribute the largest industrial surplus of Rs49.8 billion, while captive power consumers at Rs3,500 per mmBtu will generate a surplus of Rs45.3 billion.

The government has already agreed with the International Monetary Fund (IMF) that it will withdraw the cross-subsidy and pay direct subsidy from the budget to consumers.

Bulk consumers are bearing high prices of gas to subsidise the domestic consumers. They have frequently protested against the cross-subsidy system, demanding an end to the undue cost to ease pressure on their finances.

Politically motivated gas supply schemes have also put an additional burden on those consumers who have been paying higher gas prices.

Rather than providing liquefied petroleum gas (LPG) cylinders to the domestic consumers, the public gas distribution companies had been expanding their network, following pressure from successive governments, which resulted in gas shortage and pushed energy prices to higher levels. Even there was no gas for running power plants, which got imported LNG at higher rates, jacking up electricity tariff.