Private sector rejects SNGPL’s 50% gas tariff hike
Business groups warn hike will burden consumers and stifle competition in Pakistan’s newly liberalized gas market
ISLAMABAD: The private sector has strongly rejected Sui Northern Gas Pipelines Limited’s (SNGPL) proposal to increase gas transportation tariffs by up to 50 percent, warning that such a move would dismantle the competitive gas market recently opened by the Oil and Gas Regulatory Authority (Ogra) and impose heavy costs on consumers.
Industry representatives at a public hearing convened by Ogra on Monday argued that a sharp rise in transportation charges would not only push up costs for businesses and households but also discourage private players from participating in the energy sector. The dispute has emerged at a time when Pakistan is facing an acute gas shortage, with supplies curtailed to both commercial and industrial users despite surplus liquefied natural gas (LNG) imports.
Executives from private companies, including Universal Gas Distribution Company Limited (UGDCL), warned that the proposed tariff hike could collapse the liberalization framework intended to reduce reliance on state-owned monopolies. UGDCL Chief Executive Officer Ghyas Paracha told the hearing that while the regulator’s decision to open the gas market had encouraged private investment, a 50 percent tariff increase would “collapse the system entirely,” strengthening SNGPL’s monopoly.
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Paracha stressed that SNGPL’s profits had increased despite falling gas availability, owing to a fixed rate of return system that insulated the company from market realities. Financial data presented at the hearing showed that SNGPL’s operating expenditures rose from Rs 66 billion in fiscal year 2019–20 to Rs 94 billion in 2023–24. During the same period, its net profits doubled from Rs 19 billion to Rs 38.9 billion, even though indigenous gas production has declined sharply. Critics said this disconnect highlighted inefficiencies in the company’s operations and the need for structural reforms.
The private sector called for a multi-supplier, multi-buyer framework to maximize infrastructure use and reduce costs. Suggested reforms included separate accounting for transmission, distribution, and sales, the replacement of asset-based return formulas with fixed margins per million British thermal units (MMBTU) handled, and the adoption of a multi-year tariff system linked to inflation.
Stakeholders also raised concerns over unaccounted-for gas (UFG), urging Ogra to apply uniform benchmarks across all market participants and to hire independent legal experts to examine the framework governing losses in the pipeline system. Paracha argued that costs arising from inefficiencies were being unfairly shifted onto private shippers and consumers.
Representatives of the All Pakistan Textile Mills Association (APTMA) supported the call for full liberalization of the gas market, advocating the removal of restrictions on private supply to consumers. APTMA’s Asim Riaz noted that LNG customers typically do not face UFG issues and therefore should not be subjected to the same benchmarks as local gas suppliers. He further criticized the diversion of LNG cargoes abroad despite shortages at home, saying the fuel had replaced coal in Pakistan’s power sector rather than supplementing furnace oil as originally intended.
The dispute comes amid Prime Minister Shehbaz Sharif’s visit to Qatar to negotiate LNG cargo diversions, reflecting the government’s struggle to balance rising energy import bills with domestic shortages. The LNG glut has already forced the curtailment of around 400 million cubic feet per day (mmcfd) of indigenous gas supply, worsening shortages for industries.
Ogra Chairman Masroor Khan said the regulator’s role was to balance investor returns with consumer protection. He noted that Ogra had disallowed billions in costs claimed by SNGPL over the past five years, providing Rs 84 billion in relief to consumers. During the most recent review period, he said, the regulator rejected an additional Rs 57 billion in company expenditure claims.
However, SNGPL officials insisted that the company lacked the authority to set retail gas prices and faced rising operational pressures. General Manager Operations Saqib Abbas told the hearing that the burden of cross-subsidies should be shared with private shippers, arguing that end users were unfairly absorbing these costs.
The standoff highlights the tensions in Pakistan’s energy transition as the government attempts to balance market reforms, consumer affordability, and the financial sustainability of state-owned enterprises. Without structural changes, stakeholders warn, the system risks deepening supply shortages and undermining investor confidence.
Analysts say the outcome of Ogra’s review will be critical in determining whether private participation in Pakistan’s gas sector can expand or whether SNGPL’s dominance will continue unchecked. As pressure mounts on the government to deliver affordable energy in line with Prime Minister Sharif’s pledges, the gas tariff dispute has become a litmus test for broader economic reforms.
The private sector maintains that reducing tariffs and liberalizing supply is essential to restore consumer confidence and address structural inefficiencies, while SNGPL argues it needs higher revenues to cover operational costs. The regulator’s final decision will shape the future of Pakistan’s gas market and determine whether competition or monopoly prevails.
