ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) on Monday determined an increase of up to seven per cent (Rs118 per unit) in the prescribed natural gas prices to meet about Rs886 billion revenue requirement of the two gas companies during 2025-26.
In a determination sent to the federal government, Ogra worked out the average revenue requirement for Karachi-based Sui Southern Gas Company Ltd (SSGCL) at about Rs370bn — up from Rs354bn it was allowed in July — for the next fiscal year. As such, the regulator determined SSGCL’s prescribed price at Rs1,777 per million British thermal unit (mmBtu), up from Rs1,659 per mmBtu, an increase of 7.11pc, or Rs118 per unit.
On the other hand, the regulator determined the revenue requirement for Lahore-based Sui Northern Gas Pipelines Ltd (SNGPL) at Rs516bn for FY2025-26 and set its final prescribed price at Rs1,853/- per mmBTU, about Rs87 per unit, or 5pc higher than the existing price of Rs1,766 per unit.
At the start of the fiscal year on July 1, the government had already increased fixed gas charges for all consumers by 50pc and up to 17pc increase in per unit gas sale rates for industrial, power and bulk consumers, envisaging around Rs85bn additional financial burden to consumers in FY26 to meet a structural benchmark of the IMF.
Semi-annual adjustments committed to IMF
Based on Ogra’s latest determinations, the government has to decide whether to increase consumer-end gas rates and, if so, by how much for each consumer category, or to further jack up fixed rates. The government has committed to “continue to notify semi-annual gas tariff adjustments as determined by Ogra. Gas tariff adjustments will continue to include the cost of imported RLNG”, the finance minister had given to the IMF in writing.
The SNGPL and SSGCL had sought increases of more than 10.7pc and 7.6pc in their prescribed gas prices, respectively, to meet their revenue requirements for 2025-26, but the regulator worked out increases of 5pc and 7pc, respectively. Under the practice in vogue, the government notifies uniform natural gas rates across the country based on the higher prescribed price of any of the two utilities. As a result, the revenue difference between the two gas companies generates a gas development surcharge (GDS) to the provinces based on the location of the gas production.
The prescribed gas prices are revised twice a year under the law, following determinations by the Oil & Gas Regulatory Authority (Ogra), based on which the government sets consumer gas prices for various consumer categories.
The government has also committed to the IMF to provide timely biannual notifications of gas rates to avoid a further buildup of circular debt, which has already exceeded Rs3 trillion.
The Ogra asked the government “that all the categories of consumers should at least pay the average cost of service or the average prescribed price” that comes to Rs1,853 and Rs1,777 per mmBtu for SNGPL and SSGCL, respectively, to ensure the full cost of gas delivery. The government has, however, been setting different gas rates for various categories by imposing an extra-fiscal burden on middle-class and high-end residential, industrial, commercial, and power sectors through a cross-subsidy mechanism to ensure the revenue requirement determined by Ogra.
Under section 8 (3) of the Ogra law, the federal government is required to “advise the Ogra within 40 days” of the Ogra determination about the revision of prescribed prices, the minimum charges and the sale price for each category of retail consumers, for notification in the Official Gazette” provided that the overall increase in the average prescribed price remains unchanged so that the gas companies are able to achieve their total revenue requirements.
