Punjab, the gas-starved province, is set to receive a cheaper gas supply after the Senate passed a bill on Thursday to implement the weighted average cost of gas (Wacog).
In addition, the law will help the government reduce circular debt in the gas sector while the share of liquefied natural gas (LNG) in gas supply will increase.
At present, the share of LNG in gas supply stood at 24% in Pakistan despite the fact that different countries only use 5-6% as an ad hoc arrangement.
Pakistan State Oil (PSO) and Sui Northern Gas Pipelines Limited (SNGPL) have been saddled with debt of billions of rupees due to the diversion of imported LNG to the domestic sector.
At present, PSO is due to receive 439 billion rupees from different companies, of which SNGPL is one of the major defaulters due to LNG supply.
SNGPL’s LNG bill has crossed 100 billion rupees in recent winter seasons.
The company has estimated an increase of Rs 50 billion in the LNG bill during the current winter season due to the diversion of LNG to domestic consumers to overcome the gas crisis.
Now, parliament has empowered the government to apply the weighted average cost of domestic and imported gas to ease the burden of high imported gas prices on certain sectors and reduce circular debt.
The government subsidizes the supply of LNG to five major export-oriented sectors.
Recently, the government estimated that it would pay Rs 40 billion in subsidy from January to March 2022 on LNG supply to the export oriented sector.
Additionally, there are other sectors like CNG stations and fertilizer plants that also consume LNG.
Previously, the government tried to convince the provinces to introduce the weighted average cost, but they refused to share the burden with consumers in Punjab.
The Senate on Thursday passed long-awaited legislation to implement the Wacog system for the sale of local and imported LNG.
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Energy Minister Hammad Azhar, while briefing via his official Twitter account, said, “The Wacog Bill has been passed by the Senate. This is a historic and long-awaited reform that will ensure Pakistan’s energy security.
“We are now in a position to embark on reforming the gas price structure, removing anomalies and improving the supply of imported gas.”
This reform is as important as the approval of the IGCEP (Indicative Generation Capacity Expansion Plan) for the purchase of electricity a few months ago.
The two historic reforms in the electricity and oil sectors were carried out by the PTI government in the past six months, Azhar said in a tweet.
Published in The Express Tribune, February 18and2022.
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