By Staff Reporter
ISLAMABAD: Pakistan is preparing a phased restructuring and deregulation of its gas sector to rein in circular debt of 3.63 trillion rupees, almost half of it late-payment charges.
Finance Minister Muhammad Aurangzeb chaired a high-level meeting on Monday to review the proposed roadmap, which aims to make state-run gas utilities financially viable, cut cross-subsidies and system losses, and draw private investment. The framework will go to Prime Minister Shehbaz Sharif, after which further technical work and stakeholder consultations will refine it, according to an official statement.
Official figures put the gas sector’s circular debt at 3.631 trillion rupees at the end of June. Principal stood at 1.848 trillion rupees and late-payment surcharges at 1.783 trillion rupees.
The principal comprises 1.448 trillion rupees in tariff differential, 131 billion rupees in receivables from power companies, 210 billion rupees in sales and income tax receivables, and 59 billion rupees tied to litigation.
The stock rose by 344 billion rupees during the fiscal year ended June 30, from 3.288 trillion rupees a year earlier. Almost all of the increase came from interest. Principal edged up 17 billion rupees, from 1.831 trillion rupees to 1.848 trillion rupees, while late-payment surcharges jumped 327 billion rupees, from 1.456 trillion rupees to 1.783 trillion rupees.
Participants reviewed the sector’s main weak points: circular debt, cross-subsidies, unaccounted-for-gas losses and supply-demand imbalances. They said legacy liabilities and cross-subsidies must be resolved if the restructured entities are to survive and a competitive market is to take hold, without pushing an undue burden onto consumers.
The government expects the reforms to improve energy security, attract private investment, reduce fiscal and sovereign risk, expand business-to-business gas trade, stabilise pricing, give exporters cheaper access to gas and cut losses through tougher efficiency benchmarks and performance-based incentives.
Aurangzeb stressed the need to line up all stakeholders behind a practical, implementable design. The framework draws on gas-market reforms in Türkiye and the U.K., adapted to Pakistan’s institutions, market conditions and consumer interests. Participants also called for careful sequencing to protect security of supply and regulated consumers and to give private investors a predictable environment.
The meeting was attended by the petroleum minister, the prime minister’s advisers on privatisation and energy, senior Petroleum and Finance Division officials, representatives of gas utilities and a World Bank team.
Debt Pressure
The debt has been a sticking point with Pakistan’s lender. The International Monetary Fund said in its latest program review that gas-sector circular debt reached 3.4 trillion rupees by December 2025, equal to 2.7% of GDP, despite regular tariff adjustments. The Fund also noted that Pakistan had yet to develop a fully credible long-term restructuring plan for the liabilities.
Talks on a settlement plan have been slow. In July, Pakistan and the IMF held virtual discussions on a plan to cut the debt by about 1.7 trillion rupees, but reached no agreement, with the Fund pressing for gas companies’ losses to be formally recorded in their books and for some recoveries owed to them to be treated as losses.
In September, the government drew up a three-year plan to retire the debt, Express Tribune reported. It estimates cuts of 528 billion rupees in the first year, 473 billion in the second and 433 billion in the third, drawing on 840 billion rupees in dividends from gas companies, 310 billion rupees from deferring additional Qatari LNG cargoes, and 60 billion rupees from full recovery of LNG costs. The newspaper said the full-cost recovery could push gas prices higher. The finance ministry was due to brief the IMF on the plan during review talks scheduled for the last week of September.
A separate deregulation roadmap, prepared by the Petroleum Division with World Bank support, was reported finalised in August. It calls for unbundling the Sui gas companies by separating their transmission, distribution and energy businesses, a gradual shift to market-based pricing, and a subsidy system targeted at deserving consumers.
Power Theft
Separately, the government plans to introduce an Asset Performance Management System, or APMS, to curb electricity theft and manage loadshedding in phases across the country.
Energy Minister Awais Leghari outlined the plan at a ceremony in Dera Ghazi Khan on Monday. The system will flag individual transformers in high-theft areas, allowing utilities to cut power selectively rather than penalise thousands of paying customers on an entire feeder. Leghari said loadshedding will continue on feeders with losses of 30% or more, and that there will be no leniency for electricity thieves or chronic defaulters.
The Power Planning and Monitoring Company, the technical arm of the Power Division, is helping plan and carry out the reform. The APMS will provide transformer-level monitoring, analytics, digital oversight and enforcement across distribution companies, and will work alongside smart-meter and automated meter-reading rollouts that allow two-way communication and remote disconnection. Power experts say it should sharpen the identification of high-loss consumers, improve energy accounting and support data-driven load management.
Under the current policy, distribution companies cut power according to the loss category of each 11kV feeder. Areas on category 1 feeders face two hours of loadshedding a day, with four, six, eight and 10 hours on categories 2 through 5. Paying customers on those feeders lose power along with those stealing it, a Lahore Electric Supply Co. official told Dawn.
The new system would change that. Transformers would be fitted with the APMS, existing meters replaced with smart meters, and the two linked to track consumption in real time. The Lesco official gave an example. If 200 consumers draw from one transformer and the system records 100,000 units received, any gap between that and units billed to consumers points to theft. A feeder can serve 2,000 to 3,000 consumers or more, he said, while a transformer serves 150 to 200, which narrows the search considerably. The units would report theft and line losses automatically, and a smart meter that is tampered with would flag the attempt itself.
A pilot is planned for Lahore and Kasur, with Prime Minister Sharif expected to inaugurate it, the official said. The rollout, he said, would come “gradually, to protect the rights of law-abiding consumers.”
Leghari gave the scale of the problem on Sept. 16, when he told a National Assembly committee that about 3,500 of the country’s roughly 14,000 feeders face loadshedding because of theft and line losses. He also said the distribution system is overloaded and needs about 200 billion rupees of investment, to be recovered from consumers over 25 years. Once the new system is in place, he said, power would be cut only at the transformer where theft occurs rather than across a whole feeder.
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