ISLAMABAD: Pakistan is looking to break the cycle of unpaid energy bills. The Petroleum Ministry has proposed a Rs1.49 trillion settlement package aimed at easing the gas sector’s circular debt and freeing up cash for the country’s energy companies, according to news reports.
The proposal was placed before the Cabinet Committee on Energy (CCOE) as part of efforts to address the gas sector’s total circular debt of about Rs3.6 trillion.
Under the framework, the government plans to settle Rs1.49 trillion of the outstanding liabilities.
The total Rs3.6 trillion debt stock includes about Rs1.8 trillion in principal liabilities, while the remainder consists of late payment charges, tariff differentials and claims linked to the power sector.
The government plans to raise Rs540 billion through higher dividend payouts from state-owned exploration and production companies, including Oil and Gas Development Company Ltd. (OGDCL), Pakistan Petroleum Ltd. (PPL) and Government Holdings (Private) Ltd. (GHPL).
Read More: PPL’s gas discovery opens new exploration frontier in Sindh
Another Rs270 billion is expected to come through Petroleum Development Levy (PDL) collections.
The proposed settlement also relies on operational savings.
About Rs590 billion is expected to be generated by reducing reliance on expensive spot LNG imports, while another Rs95 billion could come through price adjustments and settlements involving take-or-pay contracts.
The proposed PDL contribution suggests the government could spread the settlement over several years, with annual collections estimated at around Rs80 billion to Rs90 billion through the additional Rs5-per-liter levy.
Major listed energy companies, including OGDCL, PPL, Pakistan State Oil (PSO) and Mari Petroleum Company Ltd. (MARI), could benefit from the proposed mechanism as the release of stuck receivables would improve their liquidity and working capital positions.
Gas utilities Sui Northern Gas Pipelines Ltd. (SNGPL) and Sui Southern Gas Company Ltd. (SSGC), along with PSO, could also benefit as the plan seeks to clear delayed LNG receivables and ease the broader inter-corporate debt chain.
Market estimates suggest OGDCL could announce a dividend of around Rs40 to Rs50 per share, while PPL could distribute about Rs80 to Rs105 per share as part of the proposed Rs540 billion dividend-based funding.
The remaining amount would be expected to come through GHPL, although the final structure remains subject to government decisions and approvals.
If implemented, the settlement could reduce working-capital pressures across the energy sector, improve cash-flow visibility and give companies greater room to invest in exploration and production while potentially strengthening future shareholder returns.
