Karachi June 03 2021: Pakistan ranked 6th among top nations providing the most subsidies to the natural gas sector during the year 2019, with the level close to the one observed in the gas-exporting countries according to the International Energy Agency.
The amount of the subsidy was around USD 1,750 million in real terms, or USD 8.1 per person in Pakistan. For reference, the gas subsidies in India and Bangladesh were USD 873 million (USD 0.6 per person) and USD 824 million (USD 5.1 per person), respectively.
This is because of the pricing of natural gas in the country as it is premised on the provision of cross-subsidies: the household sector (also termed as domestic or residential sector) and fertilizer sector (for feedstock) are heavily subsidized, at the cost of commercial and transport sectors.
UAE top the list with annual subsidy amount of USD4,851 million followed by USD4,702 million subsidy amount provided by KSA.
The slab-wise pricing is resulting in substantial accumulation of arrears with the Sui companies (Sui Northern Gas Pipeline Company and Sui Southern Gas Company). This is because sectors with access to subsidized rates, particularly the lower slabs of the residential sector and the feedstock slab of the fertilizer sector, are consuming substantially more gas than the ones paying above-average rates.
With the cross-subsidy mechanism not working as intended, substantial arrears for the two gas distributing companies are being generated, and these are resulting in a rapidly growing circular debt in the gas sector. The result is notable if we compare the sector wise gas consumption with the sector-wise revenues of the Sui companies.
