The Petroleum Division has begun efforts to replace the existing gas tariff structure, which uses 12 customer-category slabs, with a single uniform rate, while the transition would be based on subsidies for vulnerable and protected consumers rather than providing them cheaper gas based on use, The News reported on Friday.
According to top official sources, Federal Minister for Petroleum and Natural Resources Ali Pervaiz Malik and his team have stepped up efforts to push through sweeping reforms of the gas tariff system.
Under the proposed arrangement, protected consumers would no longer receive cheaper gas merely because they fall within a particular consumption slab. Instead, eligible low-income households would be provided with targeted financial assistance based on their income.
The proposed single average gas tariff of Rs1,708 per MMBtu would apply across the board — not only to high-end domestic consumers but also to CNG stations, cement manufacturers and commercial and industrial users. The move could provide significant relief to industrial, cement and commercial consumers, whose gas input costs would fall substantially under the proposed regime. At present, high-end domestic and CNG consumers are among the categories contributing to the roughly Rs160 billion cross-subsidy used to keep gas tariffs lower for protected and some non-protected consumers.
The reform would abolish the cross-subsidy and replace consumption-based gas subsidies with targeted, income-based assistance through BISP, shifting the basis of support from how much gas a household uses to how much it earns. Top officials of the Petroleum Division have sent a summary to the Council of Common Interests Economic Coordination Committee (CCoE), seeking the release of Rs162 billion for targeted subsidy.
The issue is likely to be taken up during the IMF’s fourth review in September-October 2026. The transition to the new tariff structure was earlier scheduled to be completed by January 2027. “We are hoping that the single gas tariff system will be enforced in the next financial year.” The average gas tariff currently stands at around Rs1,708 per MMBtu, and following implementation of the new regime, all categories of consumers are expected to move towards this uniform average tariff.
At present, cross-subsidies worth around Rs160 billion are being financed through higher tariffs imposed on a number of consumer categories, including captive power plants (CPPs) operated by export industries, general industry, commercial consumers, CNG stations, cement manufacturers and high-end domestic consumers.
The biggest change would be for protected domestic consumers. Those using up to 0.25 hm3 of gas per month pay Rs200 per MMBtu, while those consuming up to 0.5 hm3 pay Rs250 per MMBtu. Consumers using up to 0.6 hm3 are charged Rs300 per MMBtu, while those consuming up to 0.9 hm3 pay Rs350 per MMBtu. In addition, they pay fixed monthly charges of Rs600 plus Rs40 meter rent.
Among non-protected domestic consumers, households using up to 0.25 hm3 currently pay Rs500 per MMBtu. Those consuming up to 0.6 hm3 pay Rs850, consumers using up to 1 hm3 pay Rs1,250, while those consuming up to 1.5 hm3 are charged Rs1,450 per MMBtu. Non-protected consumers using up to 1.5 hm3 also pay fixed monthly charges of Rs1,500, while those consuming above 1.5 hm3 pay Rs3,000, along with Rs40 meter rent.
Higher-end domestic consumers are already paying tariffs above the average gas price. Consumers using up to 2 hm3 per month pay Rs1,900 per MMBtu, those consuming up to 3 hm3 pay Rs3,300, consumers using up to 4 hm3 pay Rs3,800, while households consuming above 4 hm3 are charged Rs4,200 per MMBtu.
Commercial consumers currently pay Rs3,900 per MMBtu, general industry pays Rs2,300, captive power plants for industry pay Rs3,500, CNG stations pay Rs3,750, and cement manufacturers pay Rs4,400 per MMBtu. These higher-paying categories are currently an important source of the cross-subsidy used to keep tariffs for protected and other lower-paying consumers below the average cost.
The estimated cross-subsidy position for FY2026-27 illustrates the wide differences between consumer categories. The Petroleum Division has also sought the support of CCoE for the settlement of legacy arrears for indigenous gas and liquid-fuel supplies to power producers and settlement of re-gasified liquefied natural gas actualisation tariff for the power sector. The division has further called for the settlement of general sales tax refunds pending with the Federal Board of Revenue and resolution of unaccounted-for-gas, gas theft and recovery issues of SSGC in Balochistan through the constitution of a political committee.
