Staff Report
ISLAMABAD: The government has taken a significant step by terminating gas subsidies for five export-oriented sectors in the current fiscal year.
The decision, communicated by the Petroleum Division’s Directorate General Gas to Sui Northern Gas Pipeline Limited’s (SNGPL) managing director, marks the end of concessional gas supply for these sectors. The government has clarified that no subsidy has been allocated for their gas supply during the fiscal year 2023-24.
SNGPL had earlier sought guidance from the Petroleum Division on the billing procedure for the five sectors during FY24. In response, the Division clarified that the approved mechanism, involving a blend of 50:50 of system gas and Re-Gasified Liquefied Natural Gas (RLNG) for nine months and 100% RLNG for three months, must be implemented without any subsidy.
The five export-oriented sectors, heavily reliant on subsidized gas supply, are now set to face increased operational costs. This decision may impact their competitiveness in the international market, potentially prompting them to explore alternative cost-saving measures.
Under the approved mechanism, these sectors will receive a blend of 50:50 system gas and RLNG for nine months, from March to November. The remaining three months of the fiscal year will see a 100% RLNG supply, all without any subsidy.
Sui Northern Gas Pipeline Limited, as the primary gas distribution company in the northern region of Pakistan, will be responsible for implementing the approved mechanism and ensuring an uninterrupted supply of gas to the export-oriented sectors as per the directives of the Petroleum Division.
As the fiscal year 2023-24 progresses, the government’s allocation of subsidies for various sectors will continue to shape economic activities and have implications for businesses nationwide.
The Petroleum Division’s decision reflects the government’s ongoing commitment to streamline energy subsidies and foster a sustainable energy sector amid fiscal challenges. The export-oriented sectors must now adapt and navigate effectively through increased costs resulting from the absence of subsidized gas supply.
