The Karachi Chamber of Commerce and Industry (KCCI) today strongly rejected the request of the Sui Southern Gas Company (SSGC) for a substantial increase in gas tariffs for the financial year 2026-27, indicating that the 2026-2026 hike is likely to be effective by 26 percent. The Oil and Gas Regulatory Authority (OGRA) rejected the proposal to protect the economy and industrial viability.The KCCI leadership, including Chairman Businessmen Group (BMG) Zubair Motiwala and President Muhammad Rehan Hanif, expressed profound concern over the proposed increment. They noted that when accumulated shortfalls exceeding Rs. 545 billion are factored in, the prescribed gas price could escalate to approximately Rs. 6,855 per MMBTU, inflating the total revenue requirement to around Rs. 1.28 trillion. This demand was deemed entirely unwarranted and unjustifiable.
Even in isolation, SSGC has sought a sharp 121 per cent rise in prescribed prices, reaching about Rs. 3,935 per MMBTU. This increment is significantly higher than the 21 per cent sought by SNGPL.
The Chamber leaders underscored that the petition fundamentally transforms gas tariffs into a vehicle for recouping historical financial inefficiencies, rather than reflecting the genuine cost of service. Gas throughput has diminished by 9.4 per cent, yet operating expenses have soared by over 108 per cent, pointing to serious shortcomings in cost management and operational efficacy.
Embedding a cumulative revenue deficit of nearly Rs. 956 billion into current tariffs imposes an unfair burden on existing consumers, particularly the industrial sector, which is already under immense pressure.
KCCI officials also strongly objected to the inclusion of Rs. 312 billion as interest on Gas Development Surcharge (GDS) receivables. They contended that this represents a financial disagreement between SSGC and the federal government, which should not be passed on to consumers who have already remitted the surcharge.
Furthermore, they rejected the incorporation of Rs. 16.35 billion for Baluchistan revenue shortfall adjustment and Rs. 2.3 billion for LPG air mix projects. They asserted that these are policy-driven costs that ought to be covered by the government via the national budget, rather than being levied upon industrial consumers.
Messrs. Motiwala and Hanif stipulated that both SSGC and SNGPL must first transparently identify and rectify the fundamental causes of their financial shortfalls instead of relying on steep tariff hikes. A core problem is the drastic reduction in industrial gas consumption, which has fallen by nearly 50 per cent due to unviable pricing.
Concurrently, high Unaccounted-for-Gas (UFG), encompassing theft, leakages, and operational inefficiencies, particularly within the domestic segment, continues at elevated levels. Domestic usage largely remains unchanged owing to substantial subsidies. This has created a distorted framework where inefficiencies are offloaded onto the paying industrial sector, further accelerating demand destruction.
They further criticised the prevalent cross-subsidy structure, under which industrial consumers are compelled to absorb the cost of subsidising household gas users. With domestic tariffs frequently set well below cost-recovery thresholds, the subsidy gap, often exceeding 85 to 90 per cent, is recouped from industry, placing an undue financial strain on the productive sector.
The Chamber leaders emphasised that such subsidies should be transparently financed through the federal budget rather than embedded within tariff frameworks that distort market dynamics.
The repercussions of excessively high gas tariffs are evident from the dramatic decrease in captive power plants, from around 200 to fewer than 80, alongside thousands of small and medium enterprises (SMEs), especially those utilising gas for heating, operating at minimal capacity or facing outright closure due to unaffordable prices.
If escalating prices are employed to offset operational and financial inefficiencies, it signifies a flawed methodology that will only intensify industrial contraction, they warned. The current trajectory, they added, is unequivocally leading towards deindustrialisation, as businesses either scale down or cease operations entirely.
This scenario is also reflected in Pakistan’s external economic performance, where exports have diminished while imports have grown, indicating a weakening output from both export-oriented and import-substitution industries. Elevated energy costs have rendered domestic production uncompetitive, necessitating greater reliance on imports and exacerbating the trade imbalance. Import substitution industries, in particular, are unable to function under such exorbitant energy charges.
In light of these realities, Messrs. Motiwala and Hanif implored the Prime Minister to intervene and ensure the withdrawal of SSGC’s application, while directing the company to present a revised proposal focused on streamlining and reducing gas tariffs to foster industrial longevity.
At a juncture when industry is already under severe duress, permitting such unprecedented and economically disruptive tariff propositions raises a fundamental query about policy direction-whether it aims to support industrial revitalisation or accelerate its downfall.
They reiterated that escalating tariffs amidst declining demand and a struggling industrial base is not a feasible resolution. They emphasised that sustainable economic expansion hinges on rational energy pricing and enhanced governance within the gas sector.