Gas Prices May Rise Massively Next Fiscal Year

The two state-run gas utilities are seeking steep tariff increases for the next fiscal year as the regulator weighs a gradual reduction in the allowance for unaccounted-for-gas losses charged to consumers.

The Oil and Gas Regulatory Authority has called public hearings in Lahore and Karachi on May 12 and 13 to consider tariff petitions from Sui Northern Gas Pipelines Ltd. and Sui Southern Gas Co. for FY 2026-27.

SNGPL has requested that its prescribed tariff be raised to Rs. 2,084 per mmBtu in the next fiscal year from Rs. 1,853, including the cost of LNG diversion. SSGCL, meanwhile, is seeking a much steeper increase, according to the regulator’s hearing notice.

The hearings come after an earlier postponement in April, when uncertainty over gas and LNG prices linked to the Middle East crisis complicated the review process. Under the law, the regulator must issue its determination at least 40 days before June 30 so the government can notify revised consumer tariffs from July 1.

The timing is also significant because Pakistan has committed to the International Monetary Fund to issue gas tariff notifications twice a year on time to help contain circular debt, which has climbed above Rs. 3 trillion.

An independent consultant hired by the regulator has proposed a modest reduction in the UFG allowance over the next five years. The recommendation would cut the benchmark allowance for both companies to 6.5% in FY 2027, 6.3% in FY 2028, 6% in FY 2029, 5.8% in FY 2030 and 5.5% in FY 2031.

Under the proposal, SNGPL would receive an additional 0.5 percentage-point allowance for local challenges, while SSGCL would receive an additional 1.7 percentage points. That would put SNGPL’s UFG allowance at 7% in FY 2027 and about 6% by FY 2031, while SSGCL’s would stand at 8.2% in FY 2027 and 7.3% by FY 2031.

The current system-loss allowance built into prescribed gas prices is about 7.6%, including a 2.6% performance-based UFG allowance. Actual UFG losses stand at 8.8% for SNGPL and 13.6% for SSGCL.

The consultant also flagged the pricing treatment of re-gasified liquefied natural gas, saying there is currently no separate benchmark for transmission or distribution losses on RLNG. Instead, the previous year’s average indigenous gas UFG is being used, a practice that has effectively raised RLNG sale prices by around Rs. 1,500 per million British thermal units, nearly matching the prescribed price of domestic gas.

The tariff review will be closely watched by industry and households as Pakistan tries to rein in energy-sector losses without adding further pressure to inflation.