ISLAMABAD: Pakistan’s gas circular debt has surged to Rs3,200 billion, marking a sharp increase from Rs2,600 billion, primarily driven by a rise in Late Payment Surcharge (LPS) which now stands at Rs1,450 billion, officials revealed. The remaining Rs1,750 billion includes Rs210 billion due to income tax and GST, while the actual stock of circular debt is estimated at Rs15 billion.
The government plans to waive the LPS for state-owned gas suppliers and buyers, including exploration and production companies and Sui gas companies. Officials explained that these entities did not borrow from banks to incur these charges, unlike Pakistan State Oil which will be required to pay its LPS due to bank borrowing. The government also intends to eliminate Rs210 billion in outstanding income tax and GST liabilities.
To address the Rs1.5 trillion circular debt, the Task Force on Energy, in coordination with KPMG and the Petroleum Division, has proposed a comprehensive strategy. Measures include introducing a petroleum levy of up to Rs5 per litre on petrol and diesel, diverting RLNG cargoes to the international market, and utilizing capped dividends from public sector oil and gas companies.
Under the plan, the government aims to divert 35 LNG cargoes in 2026, which is expected to reduce the fuel import bill by over one billion dollars and generate Rs160 billion annually for circular debt retirement. The petroleum levy could contribute an additional Rs90 billion per year, while dividends from state-owned companies will further support debt reduction over five years.
The circular debt management plan was presented to the Prime Minister on December 31, 2025. Following the presentation, a 17-member committee led by Deputy Prime Minister Senator Ishaq Dar was formed to review the plan. The committee will determine the levy rate, between Rs3 and Rs5 per litre, and finalize the timeline for eliminating circular debt.
Meanwhile, the government successfully reduced RLNG diversion costs to the domestic sector from Rs242 billion to Rs185 billion, generating Rs57 billion in savings. Consumers benefited from this relief, while improved gas bill recovery of Rs61 billion, including Rs13 billion from Sui Northern and Rs47 billion from Sui Southern, was applied to offset previous losses.
