ISLAMABAD: The government is seeking comprehensive amendments to the decades-old Gas Development Surcharge (GDS) law to strengthen recovery from defaulting consumers, account for situations where gas is sold below cost and address regulatory gaps contributing to a gas-sector circular debt that has crossed Rs3.5 trillion.

Petroleum Minister Ali Pervaiz Malik is scheduled to introduce in the National Assembly on Monday (today) the Natural Gas (Development Surcharge) (Amendment) Bill, 2026, seeking changes to the Natural Gas (Development Surcharge) Ordinance, 1967, according to the assembly’s Aug 17 agenda.

The proposed legislation seeks to update the 1967 ordinance in line with the modern regulatory framework that emerged following the establishment of the Oil and Gas Regulatory Authority (Ogra) in 2002.

Official sources said the GDS was originally designed to collect the differential margin arising when consumer-end gas sale prices exceeded Ogra-prescribed prices, with the proceeds transferred to provinces under the 1990 NFC Award.

Amendment bill likely to be tabled in NA today

However, the law has failed to keep pace with changing market conditions, particularly when governments delay tariff revisions.

Such delays have led to the emergence of a “negative GDS” — or negative differential margin — when consumer-end sale prices remain below the actual cost of gas. The existing legal framework provides no mechanism to formally account for or recover this negative margin, while positive GDS is transferred to provinces according to their gas production.

The legislative gaps have also prompted repeated audit objections over the timelines and discretion exercised by gas utilities in settling GDS payments and accumulating late payment surcharge liabilities.

The Petroleum Division is also concerned over a substantial backlog of GDS receivables, comprising both principal amounts and late payment surcharge (LPS), particularly from dedicated power plants caught up in the power sector’s circular debt.

The gas sector’s circular debt itself has risen beyond Rs3.5tr.

To address these anomalies, the proposed bill seeks to amend the definitions of “sale price” and “prescribed price” and formally bring them within Ogra’s statutory framework.

It would also introduce legal definitions for “negative differential margin” and “late payment surcharge”, providing a mechanism to deal with situations where the government keeps consumer tariffs below the prescribed cost.

Published in Dawn, August 17th, 2026