Govt Moves to Roll Out MYT Framework for Gas Distribution Companies

The government is preparing to introduce a Multi-Year Tariff (MYT) framework for Pakistan's gas utilities, based on the Regulatory Asset Base (RAB) and Weighted Average Cost of Capital (WACC) models, as part of a broader plan to reform the country's gas sector.

 

The proposal forms part of the Gas Sector Transition Roadmap, a comprehensive reform agenda aimed at transforming Pakistan's gas industry into a financially sustainable, competitive, and investment-friendly market through the restructuring of state-owned gas companies.

 

Presented to Petroleum Minister Ali Pervaiz Malik by a high-level steering committee, the roadmap seeks to address structural inefficiencies, reduce circular debt, attract private investment, and gradually liberalise the gas market while ensuring reliable and affordable energy supplies.

 

During the initial phase, the government plans to introduce separate regulatory methodologies for Transmission System Operators (TSO), Distribution System Operators (DSO), and Regulated Gas Sales (RGS). The reforms also envision unbundling Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) into transportation businesses and trading companies.

 

Under the proposed structure, trading operations will be divided into Regulated Gas Sales (RGS) for domestic consumers and Competitive Gas Sales (CGS) for commercial and industrial users. While the RGS segment will remain regulated with targeted subsidies, the CGS business will gradually transition to market-based pricing as competition develops.

 

To encourage private sector participation, the roadmap proposes a Gas Market Release Programme, under which 20% of gas volumes will be auctioned in the first year, followed by an additional 10% annually over the next two years.

 

The reform package also aims to introduce cost-reflective gas tariffs, phase out untargeted subsidies, replace slab-based pricing with a single-rate tariff mechanism, and curb the build-up of circular debt.

 

To address existing financial liabilities, the government plans to establish a dedicated holding company to manage receivables and debt, while also restructuring LNG import agreements and other upstream and downstream contracts.

 

The roadmap calls for amendments to the OGRA Act, licensing rules, transmission and distribution codes, and third-party access regulations to support market liberalisation. It also proposes strengthening OGRA's oversight capacity through a dedicated market monitoring unit.

 

Officials acknowledged that tariff reforms could face political and social resistance, but said targeted subsidies and phased implementation would help cushion the impact on low-income consumers.

 

The implementation timeline will depend on regulatory approvals, legal amendments, institutional readiness, and consensus among federal and provincial stakeholders before the reforms are rolled out.