Plan for 20% increase in gas prices on anvil

Once the proposed 20% increase takes effect, SNGPL and SSGCL will generate Rs45 billion.

ISLAMABAD:

The government is working on a plan to increase gas tariff by 20% for all, except domestic consumers, to generate revenue for state-owned gas utilities.

Once the proposed 20% increase takes effect, the gas utilities – Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) – will generate Rs45 billion.

Oil and Gas Regulatory Authority (Ogra) has already approved up to 14% hike in the tariff of SNGPL and SSGCL for the ongoing fiscal year 2014-15 and 12% and 17% hike, respectively, in the tariff of SNGPL and SSGCL for the year 2013-14.

Sources said the government was currently working on the plan and different scenarios were being prepared. “However, due to long marches, the approval of hike in gas prices is being delayed,” official said adding that Prime Minister Nawaz Sharif did not want to raise gas prices for domestic consumers.

“If gas prices are not increased for domestic consumers, other consumers of CNG, industrial and captive power sectors will bear an additional burden of over Rs41 billion to cross-subsidise domestic consumers,” official said.



The government was to increase gas prices twice – on January 1, 2014 and July 1, 2014 – but it delayed the decision due to recovery from gas consumers of Rs49 billion, stuck in companies due to a decision of the previous management of Ogra, headed by Tauqeer Sadiq.

Officials said the proposed 20% increase would enable the companies to generate Rs45 billion from consumers. They said it was in addition to Rs49 billion which the government wanted to pass on to consumers by issuing policy guidelines to Ogra to bail out the gas companies.

Following an increase by Orga in the Unaccounted for Gas (UFG) ceiling – which covers theft and leakage – from 5% to 7%, the state-owned gas transmission and distribution firms earned an additional Rs49 billion. However, National Accountability Bureau (NAB) had termed this increase a scam.

The Unaccounted for Gas (UFG) for the SSGCL was set at 7% – subject to decision on a stay order by the Sindh High Court – while the UFG for the SNGPL was fixed at 4.5% for 2013-14.

The policy guidelines, proposed by the Ministry of Petroleum and Natural Resources to bail out gas distributing companies, may also push up gas prices by Rs35 per million metric British thermal units (mmbtu).

Published in The Express Tribune, September 25^th, 2014.