Govt Seeks IMF Nod for Single Gas Tariff, Rs. 162 Billion Subsidy

For context, the Petroleum Division intends to seek the International Monetary Fund's approval for a single gas tariff from July 1, 2027, replacing the existing cross-subsidy system with targeted financial assistance for low income households.

Key points

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• Instead, low income households would qualify for direct financial assistance based on income, potentially through the Benazir Income Backing Programme.
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• The Petroleum Division has already moved a summary seeking backing for the proposed subsidy mechanism.
• The proposal is projected to be discussed with the visiting IMF mission during its ongoing review of Pakistan's program.

Under the proposed system, the administration would allocate around Rs. 162 billion for targeted backing while ending the existing 12 slab tariff structure. Consumers would move toward a uniform average tariff of around Rs. 1, 708 per MMBtu, with financial assistance determined by household income.

Notably, the proposal is projected to be discussed with the visiting IMF mission during its ongoing review of Pakistan's program. Pakistan had earlier committed to the Fund to eliminate the approximately Rs. 162 billion cross-subsidy and replace consumption based backing with an income-based mechanism. DISCOs Sale Needs Provincial Approval: Senators Panel.

Notably, the single tariff regime was previously linked to an implementation date of January 1, 2027, but authorities now expect the change to take effect from July 1, 2027. Under the proposed system, households would no longer receive cheaper gas simply since their consumption falls within a protected slab.

Instead, low income households would qualify for direct financial assistance based on income, potentially through the Benazir Income Backing Programme. The administration would therefore separate the gas rate from the social protection mechanism.

Meanwhile, the change would significantly alter the existing structure for domestic consumers. Protected households at present pay much lower rates, including Rs. 200 per MMBtu for consumption up to 0.25 hm³, Rs. 250 up to 0.5 hm³, Rs. 300 up to 0.6 hm³ and Rs. 350 up to 0.9 hm³. CPEC-Linked IPPs Drive HUBCO Dividend Income to Rs. 29.3 Billion.

In practice, the existing cross subsidy is estimated at around Rs. 162 billion for FY2026-27. Higher-paying consumers at present assist finance cheaper gas for protected households, with commercial consumers paying around Rs. 3, 900 per MMBtu, CNG stations Rs. 3, 750, cement manufacturers Rs. 4, 400, captive power consumers Rs. 3, 500 and general industry approximately Rs. 2, 300.

For context, the proposed uniform tariff would lower gas costs for industrial and commercial consumers whose existing rates are above the proposed average. For households at present paying protected rates, even so, gas rates could rise significantly, with financial relief depending on eligibility under the new income based subsidy.

For context, the Petroleum Division has already moved a summary seeking backing for the proposed subsidy mechanism. Approval from relevant administration forums and the IMF would be required before the new tariff system can be implemented.

Notably, the administration expects the proposed system to produce gas subsidies more targeted and transparent while reducing distortions caused by the existing cross subsidy model. A key challenge will be establishing an effective income based mechanism before the current consumption based protection is withdrawn. Stay Connected with ProPakistani.

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In short, govt Seeks IMF Nod for Single Gas Tariff, Rs. 162 Billion Subsidy is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.