Pakistan Grapples with Soaring Gas Circular Debt,Weighs Fuel Levy Increase

Islamabad – Pakistan’s gas sector is facing a mounting circular debt exceeding Rs3 trillion,prompting teh government to consider raising the petroleum levy as a potential solution. While an increase in gas tariffs has been ruled out for now, officials are exploring various strategies to address the financial crisis, seeking to avoid replicating the issues plaguing the power sector.

The Scale of the Problem: A Rs3 Trillion Debt

Petroleum Minister Ali Pervaiz Malik confirmed the ample gas circular debt during a testimony before the National Assembly’s Standing Committee on Petroleum on Tuesday . This figure includes late payment surcharges, exacerbating the financial strain on the gas companies. The debt has surpassed similar challenges experienced in the power sector, raising concerns among lawmakers.

Alternatives to Tariff Hikes: The Petroleum Levy Option

Despite a determination by the Oil & Gas Regulatory Authority (Ogra) in November 2025 to increase natural gas prices by up to 7% (Rs118 per unit) to address a revenue shortfall of Rs886 billion , the government, under the direction of Prime Minister Shehbaz Sharif, has opted to forego a tariff increase for the next six months. Rather, the government is evaluating a potential increase in the petroleum levy, reportedly considered at Rs5 per litre on both petrol and diesel, to generate revenue to retire the gas sector debt , .

Currently, the petroleum levy stands at up to Rs82 per litre, already utilized for purposes such as subsidizing power consumers and funding road construction in Balochistan. This suggests a willingness to leverage fuel taxes to address broader economic needs.

Addressing Systemic Issues: Reducing Losses and Improving Efficiency

Beyond revenue generation, the government is focused on addressing the root causes of the circular debt. Minister Malik highlighted ongoing reforms to curb gas theft and reduce losses within the distribution networks. Sui Northern Gas Pipelines Ltd (SNGPL) has reportedly reduced unaccounted-for gas (UFG) losses from 9% to 5%, while Sui Southern Gas Company (SSGC) has decreased losses from 17% to 10% . However, SSGC noted that Balochistan alone accounts for approximately Rs12 billion in annual gas losses.

The implementation of feeder-to-feeder monitoring systems is also underway, aiming to enhance oversight and control across the gas network. Furthermore, the government is collaborating with the World Bank to strengthen the capacity of the Directorate General of Petroleum Concessions.

LNG Diversification and Supply Stability

Pakistan has secured an agreement with Qatar to divert surplus Liquefied Natural Gas (LNG) cargoes to international markets, providing a potential revenue stream and managing excess supply.Domestic gas supplies remain stable, with no domestic gas fields currently experiencing curtailments. Gas is being prioritized for the power sector to prevent load-shedding.

Key Takeaways

• Pakistan’s gas circular debt has reached over Rs3 trillion, creating a significant financial challenge.
• The government is considering an increase in the petroleum levy to address the debt, avoiding an immediate increase in gas tariffs.
• Efforts are underway to reduce gas theft and losses within the distribution networks.
• Pakistan is diversifying its LNG supply and exploring opportunities to export surplus cargoes.

Addressing the gas sector’s circular debt is crucial for ensuring the long-term sustainability of Pakistan’s energy infrastructure. The government’s strategy, combining revenue generation measures with operational improvements, will be critical in resolving this issue and securing a stable energy supply for the country.

Published January 7th, 2026