The Oil and Gas Regulatory Authority (Ogra) has raised questions over Sui Northern Gas Pipelines Limited (SNGPL)’s request for an increase of Rs31 billion in its revenue requirement for the financial year 2012-13 on different accounts including supply of free gas to employees, expansion of pipeline network and higher cost of retaining employees.
In a letter sent to the SNGPL managing director, Ogra’s Member Gas Mansoor Muzaffar expressed serious concern over the request for allowing an increase of Rs31 billion in revenue requirement for 2012-13.
Though the country was facing acute energy shortages, the SNGPL, in its petition for the revenue requirement, had sought a 76% increase in human resource cost from Rs6.69 billion in 2011-12 to Rs11.78 billion in 2012-13.
The gas utility also sought permission for an increase of 713% in doubtful debt against receivables to Rs1.46 billion in 2012-13 compared to Rs180 million in the current year.
Muzaffar, however, was of the view that the SNGPL
had not provided required information, which was causing delay in finalising the company’s revenue requirement.
The requested increase of Rs31 billion in the asset base for earning revenues had not been supplemented with additional volume of gas to be transported, distributed and sold to the consumers, he said.
“Without this information, the request for Rs31 billion will not be ascertained,” Muzaffar said, adding it would be needless to reiterate that the expansion in network would unnecessarily increase the gas load and reduce the volume available for sale. As a result, he added, it would increase gas load-shedding as well as prices.
“The company is requested to justify its position in terms of Rule 17 (j) of Natural Gas Tariff Rules 2002, which stipulates that only such capital expenditure should be incurred if the rate base is prudent, cost-effective and economically efficient,” he said.
Muzaffar described free gas facility for the company staff as inflated while on the other side the country was moving towards gas conservation and load-shedding. “What forum had approved free gas facility of 60 HM3 per year for one staff. Natural gas consumption of a domestic consumer may not exceed 1.5 HM3 per month,” he asked.
Analysing the human resource cost, he suggested that the company may provide average cost per employee in each grade of executives and subordinates including cost for retirement of subordinates.
Ogra believed that a court case relating to unaccounted-for-gas (UFG) was being dragged to enjoy a 7% UFG for the years to come. Muzaffar also noted an abnormal increase in the fee on hiring of legal counsel.
“The company has posted its own law officers in billing and sales departments of each region. Therefore, additional cost of legal expenditure is not understood and need to be clarified,” he added.
“The company has been supplying gas to consumers against security deposit, therefore, it may justify its demand for increase in doubtful debt,” he added.
Published in The Express Tribune, May 5th, 2012.
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