The government has started preparations to further increase the prices of petroleum products to offset the impact of growing circular debt in the gas sector.

According to sources, an increase of Rs3 to Rs10 per litre in the petroleum levy is under consideration to address the rising circular debt in the gas sector.

The sources said that the government is currently holding consultations on borrowing up to Rs2000 billion from banks to overcome the financial crisis in the gas sector.

An important meeting is expected between the Ministry of Finance and the Ministry of Energy in this regard.

On the other hand, the International Monetary Fund (IMF) has sought a clear and practical plan from the government regarding the gas sector circular debt.

The IMF warned that the government must provide a concrete roadmap for eliminating the circular debt of Rs2800 billion, or it could pose a hurdle in receiving the next loan tranche.

According to the sources, like the power sector, the government has been forced to accelerate reforms in the gas sector, and in this context, the petroleum levy is being increased to reduce the burden of circular on internal resources.

According to sources in the Petroleum Division, the circular debt of the gas sector has reached a dangerous level of Rs2800 billion, due to which gas companies and other state-owned oil and gas institutions are facing a severe financial crisis.

If this increase is approved, the public may face not only higher petrol prices but also a further hike in gas tariffs, further intensifying the inflationary wave.

A next round of talks between the government and the IMF is expected this week.

The sources said that the government has started preparing an emergency strategy to deal with this situation, under which it is considering obtaining loans of up to Rs2000 billion from banks.

The government is consulting banks to secure the loan on easy conditions. Negotiations are also underway to waive or reduce up to Rs800 billion in interest.

The government is also considering various proposals to repay the loan, including imposing a petroleum levy of Rs3 to Rs10 per litre.

In addition, a proposal to add an additional surcharge to gas bills is also under consideration to make debt repayment feasible.

The government plans to repay bank loans in phases over the next five years. If a petroleum levy is imposed, it is expected to generate an annual revenue of Rs180 billion.