By Staff Reporter
ISLAMABAD: The oil and gas regulator has approved increases of as much as 7% in prescribed natural gas prices for the fiscal year ending June 2026, paving the way for higher tariffs that could add to consumer burdens amid efforts to curb a ballooning energy-sector debt.
The Oil and Gas Regulatory Authority (Ogra), determined the hikes in a decision sent to the federal government on Monday, aiming to cover a combined revenue requirement of about Rs886 billion for the nation’s two main gas utilities. That includes Rs370 billion for Sui Southern Gas Co. and Rs516 billion for Sui Northern Gas Pipelines Ltd.
For Karachi-based Sui Southern, Ogra set the prescribed price at Rs1,777 per million British thermal units, up 7.11%, or Rs118 per unit, from the prior level of Rs1,659 per mmBtu. The regulator had allowed Sui Southern Rs354 billion in revenue for the current fiscal year in a July determination.
Lahore-based Sui Northern’s revenue requirement was pegged at Rs516 billion, with its prescribed price rising 5%, or Rs87 per unit, to Rs1,853 per mmBtu from Rs1,766. The increases come after the government already boosted fixed gas charges by 50% for all consumers at the start of the fiscal year on July 1, along with rate hikes of as much as 17% for industrial, power and bulk users. Those earlier adjustments were projected to impose an additional Rs85 billion in costs on consumers during the year, fulfilling a structural benchmark under Pakistan’s program with the International Monetary Fund.
The latest Ogra determinations now leave it to the government to decide on consumer-end rate adjustments, potentially through further increases in fixed charges or per-unit prices across categories. Under Pakistani law, prescribed gas prices are revised twice annually based on Ogra’s assessments, with the government then setting final retail rates.
Islamabad has pledged to the IMF to “continue to notify semiannual gas tariff adjustments as determined by Ogra. Gas tariff adjustments will continue to include the cost of imported RLNG,” Finance Minister Muhammad Aurangzeb wrote in a commitment to the lender.
Sui Southern and Sui Northern had originally sought larger hikes of more than 7.6% and 10.7%, respectively, to meet their projected revenue needs for 2025-26. Ogra trimmed those to 7% and 5%. In practice, the government typically notifies uniform natural gas rates nationwide, basing them on the higher prescribed price between the two utilities. That approach creates a revenue differential, generating a gas development surcharge distributed to provinces according to gas production locations.
Ogra urged the government in its determination “that all the categories of consumers should at least pay the average cost of service or the average prescribed price,” which stands at Rs1,853 per mmBtu for Sui Northern and Rs1,777 for Sui Southern, to ensure full recovery of delivery costs. The government, however, has historically set varying rates by category, relying on cross-subsidies that shift extra burdens onto middle-class and high-end residential users, as well as industrial, commercial and power sectors, to meet Ogra’s overall revenue targets while protecting lower-income groups.
Timely rate notifications are critical to preventing further accumulation of circular debt in the energy sector, which has already surpassed Rs3 trillion, according to government commitments to the IMF. Under Section 8(3) of the Ogra Ordinance, the federal government must “advise the Ogra within 40 days” of the determination on revisions to prescribed prices, minimum charges and sale prices for each retail consumer category, for publication in the official gazette. The law stipulates that the overall average prescribed price must remain unchanged to allow the utilities to achieve their total revenue requirements.
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