The lender has also called for measures to limit the federal government’s authority to reduce gas prices after OGRA determines the applicable tariffs.
According to sources, the issue was discussed at a recent meeting of the Cabinet Committee on Energy (CCOE), where officials were informed that the IMF had taken note of the growing tariff differential in the gas sector during its reviews under the Extended Fund Facility (EFF) and Standby Arrangement (SBA). The tariff differential has been identified as one of the factors contributing to the accumulation of circular debt.
The IMF has sought further amendments to the OGRA Ordinance 2002 to prevent the government from reducing consumer gas tariffs below the rates determined by the regulator. The objective is to ensure that gas prices remain aligned with the cost of supply and that the sector does not accumulate additional liabilities because of delayed or insufficient tariff adjustments.
According to the sources, the government has also committed to reviewing consumer gas prices within the prescribed period after OGRA announces its determinations. The government is expected to submit implementation reports to the IMF regarding compliance with the agreed tariff adjustment mechanism.
The OGRA Ordinance 2002 was amended through legislation in March 2022 following an IMF requirement. Under the amended framework, the government agreed to make timely adjustments to consumer gas prices in line with OGRA’s determinations in order to prevent further accumulation of circular debt.
Unlike the electricity sector, where the government provides budgetary subsidies to cover tariff differentials, the gas sector largely operates through a cross-subsidy mechanism designed to protect lower-income domestic consumers.
Under this system, tariffs for other categories, particularly industrial and commercial consumers, are kept relatively higher to help meet the revenue requirements of gas distribution companies.