ISLAMABAD: Pakistan's government is preparing a phased restructuring and deregulation of its gas sector to tackle circular debt, cross-subsidies and system losses, and to improve the financial viability of gas utilities while attracting private investment, officials said Monday.
The plans were disclosed at a high-level meeting chaired by Federal Minister for Finance and Revenue Muhammad Aurangzeb to review the proposed restructuring and deregulation roadmap for the gas sector, with a focus on financial sustainability, operational efficiency, consumer welfare and greater private-sector participation.
The proposed reforms aim to establish a financially sustainable, efficient and competitive gas market that supports businesses, encourages private investment and protects consumer welfare, according to an official statement. The meeting discussed a phased transition toward greater competition, supported by effective regulation, improved operational performance and a more sustainable approach to gas pricing and supply.
Official said gas sector circular debt surged to Rs3.63 trillion, including a principal amount of Rs1.848 trillion, while late payment surcharges added another Rs1.783 trillion to total outstanding liabilities at the end of June 2026.
The principal component included Rs1.448 trillion in tariff differential, Rs131 billion in receivables from power companies, Rs210 billion in sales and income tax receivables, and Rs59 billion related to litigation.
Gas circular debt increased by Rs344 billion during fiscal year 2025-26, rising from Rs3.288 trillion on June 30, 2025, to Rs3.631 trillion by June 30, 2026. The principal amount rose by Rs17 billion during the period, from Rs1.831 trillion to Rs1.848 trillion, while late payment surcharges climbed by Rs327 billion, from Rs1.456 trillion to Rs1.783 trillion.
Participants reviewed key sectoral challenges, including circular debt, cross-subsidies, unaccounted-for-gas losses and supply-demand imbalances. Discussions focused on addressing legacy liabilities, improving the financial viability of gas utilities and ensuring that existing financial pressures do not undermine the proposed market structure or place an undue burden on consumers.
A sustainable resolution of legacy circular debt and a clear approach to cross-subsidies were identified as important to the viability of restructured entities and the transition to a competitive market.
The meeting also discussed expected outcomes of the reform framework, including enhanced energy security, increased private-sector investment, reduced fiscal and sovereign risks, greater business-to-business transactions, more stable and sustainable gas pricing, improved access to competitively priced gas for exporters, and lower system losses through stronger efficiency benchmarks and performance-based incentives.
Aurangzeb emphasized the importance of aligning all stakeholders around a practical and implementable reform architecture. The proposed framework draws on international experience, including gas-sector reforms in Türkiye and the United Kingdom, while taking into account Pakistan's institutional structure, market conditions and consumer interests.
Participants stressed the need for careful sequencing to safeguard security of supply, protect regulated consumers and create a predictable environment for private-sector participation.
The proposed framework will be presented to the prime minister, after which further technical work and stakeholder consultations will help refine the reform approach and support an orderly transition.
The meeting reaffirmed the government's commitment to advancing gas-sector reforms in a phased and consultative manner to strengthen financial sustainability, improve operational efficiency, attract investment and develop a more competitive gas market while safeguarding consumer interests.
The meeting was attended by the federal minister for petroleum, the adviser to the prime minister on privatization, the special assistant to the prime minister on energy, senior officials from the Petroleum and Finance Divisions, representatives of gas utilities and a World Bank team.
