Islamabad is currently witnessing growing public discontent over the persistent energy shortages and escalating gas bills that have burdened households and industries alike. At the center of this crisis lies the government’s monopolistic control over the natural gas sector, which many experts argue has long been plagued by inefficiency, corruption, and outdated infrastructure. Prime Minister Shehbaz Sharif now stands at a critical crossroads, with a unique opportunity to initiate meaningful reforms that could reshape Pakistan’s energy landscape and alleviate the hardships faced by millions.
The natural gas distribution network in Pakistan has been dominated for decades by state-owned companies, whose operational shortcomings have led to widespread dissatisfaction among consumers. These government entities have been criticized for delivering substandard services while charging exorbitant rates, making it increasingly difficult for both residential users and industrial consumers to manage their energy costs. The inefficiencies embedded in this monopolistic system have not only stifled competition but also contributed to a deteriorating infrastructure that fails to meet the growing demand.
One of the key issues highlighted by industry analysts is the controversial pricing structure approved by the Oil and Gas Regulatory Authority (OGRA). For the fiscal year 2025/26, one of the state-run companies submitted a transportation tariff petition amounting to Rs98.765 billion. This budget is divided into three main components: operating expenses totaling Rs36.29 billion, depreciation costs of Rs26.32 billion, and a return on assets profit of Rs36.15 billion. While the operating costs cover the day-to-day functioning of the gas distribution system, the additional allowances for depreciation and return on assets—comprising nearly 63% of the total transportation cost—have raised serious concerns about double-charging consumers.
Experts explain that although these allowances are intended to cover asset wear and generate profits, the actual cash collected against depreciation and return on assets is often not reinvested into the system. Instead, these funds accumulate as reserves or profits, which are then paid out as dividends, primarily benefiting the government as the majority shareholder. This practice effectively means consumers are paying twice: once through bank loans and financial charges already included in the tariffs, and again through these additional allowances. A retired industry official described this as an unjust burden on consumers, suggesting that eliminating these charges could reduce gas tariffs by at least Rs200 per MMBtu. Furthermore, redistributing the accumulated reserves back to consumers could lower prices by an additional Rs200 to Rs300 per MMBtu.
Adding to the financial strain, the gas distribution network suffers from technical and commercial losses estimated at 7.5%. These losses stem from ageing pipelines, theft, and mismanagement, resulting in significant volumes of gas disappearing before reaching end-users. Consumers ultimately bear the cost of these inefficiencies through higher tariffs and unreliable supply. Industrial sectors, particularly gas-intensive industries such as textiles and fertilisers, face frequent gas curtailments that disrupt production schedules and erode Pakistan’s competitiveness in global markets. The unpredictability of gas availability has made long-term investment and planning nearly impossible for these businesses, further underscoring the urgent need for systemic reform.
Corruption and mismanagement have also flourished under the current monopolistic regime. Illegal gas connections, meter tampering, politically influenced hiring practices, and procurement irregularities have become commonplace within these state-run entities. Ordinary citizens endure the consequences through inconsistent gas supply, especially during harsh winter months, inflated bills due to system losses, and inadequate customer service. Meanwhile, the circular debt crisis continues to escalate, posing a serious threat to the country’s fiscal health and economic stability.
Looking beyond Pakistan’s borders, countries that have embraced liberalisation and private sector participation in their gas markets have reaped significant benefits. For instance, British Gas in the United Kingdom operates within a fully competitive environment, ensuring efficient service delivery driven by market forces. Similarly, Spain’s ENAGAS manages an extensive network of approximately 13,000 kilometres, supported by multiple LNG terminals and underground storage facilities, ranking it among Europe’s most advanced gas operators. These examples demonstrate that opening the market to private players can enhance efficiency, improve energy security, and stimulate economic growth.
Despite numerous private companies applying for licenses from OGRA, their entry into Pakistan’s gas sector remains stalled. These new entrants face a host of challenges including bureaucratic hurdles, inflated tariffs, complex regulations, and limited access to critical infrastructure. Additionally, policy uncertainty, financing difficulties, high transportation costs, and excessive line losses further hinder their ability to operate effectively. Consequently, the sector continues to suffer from supply bottlenecks and a lack of investor confidence, perpetuating the cycle of inefficiency and consumer dissatisfaction.
Nonetheless, the involvement of private firms is crucial for the sector’s revival. Their participation could generate substantial additional government revenue through taxes and levies, while simultaneously easing the burden of circular debt. Experts stress that a carefully phased deregulation process, supported by a strong and independent regulatory authority, is essential to ensure a smooth transition. Clear consumer protection measures must be implemented, and infrastructure investment obligations should be tied to distribution licenses to prevent underinvestment and guarantee network expansion.
Transparent pricing mechanisms that balance affordability with cost recovery will be vital, alongside targeted social safety nets to shield vulnerable populations during the transition period. The long-term costs of maintaining the current monopolistic structure far outweigh the short-term uncertainties associated with deregulation. Industry leaders and policymakers are urged to act decisively to dismantle the inefficient state monopolies that have long hindered Pakistan’s energy sector.
Prime Minister Shehbaz Sharif has consistently emphasized his commitment to economic reforms and improving public welfare. Deregulating the natural gas sector presents a bold opportunity to fulfill these promises by breaking the grip of state monopolies and unleashing the potential of private sector dynamism for the benefit of all Pakistanis. The time to act is now, as the country’s energy future and economic prosperity hang in the balance.
