At consumers’ expense, govt likely to offer incentives to SSGC

Move will take away relief of billions of rupees from gas consumers

ISLAMABAD: The government is working on a proposal to revive the incentives given by the industry regulator to Sui Southern Gas Company (SSGC) during the tenure of previous Pakistan Peoples Party (PPP) administration which will take away a Rs31-billion relief from the consumers.



The incentives were given by the Oil and Gas Regulatory Authority (Ogra), led by then chairman Tauqeer Sadiq, in 2009-10, but were later withdrawn as they had triggered a controversy, prompting the National Accountability Bureau (NAB) to launch an investigation.

“The government of Pakistan Muslim League-Nawaz (PML-N) is working on a plan to offer the incentives once again. The move comes after the Sindh High Court turned down an SSGC’s plea that had challenged the regulator’s decision which reversed treatment of the company’s non-core activities as non-operating income,” an official disclosed.

Some business tycoons, who are said to be very close to government circles, have set their eyes on the huge amount of Rs31 billion that they can pocket if the proposed policy is implemented by the federal government. SSGC shareholders will also have their share of the pie.

The business moguls had minted money in the past as well by trading Sui Northern Gas Pipelines’ shares in the wake of the incentives.

While determining the final revenue requirement of SSGC for financial year 2009-10 - the time when the PPP was in power, Ogra treated the company’s income arising from non-core activities as non-operating income.

Later, while revising the revenue requirement for 2010-11, the regulator changed its stance and declared all income generated by SSGC from non-core activities as operating income. Upset with the decision, SSGC challenged it in the Sindh High Court and got a stay order.

However, after conducting hearings, the court in its order of November 25, 2016 turned down the SSGC’s plea.

In line with the verdict, Ogra started calculating all SSGC income from non-core activities as operating income and directed the company to make adjustments retrospectively from financial year 2010-11 to 2015-16.

The impact of the adjustments in relation to the income already recorded in audited accounts of the company under the head of non-operating income was calculated at Rs27.5 billion and for 2016-17 it was estimated at Rs3.5 billion, totalling Rs31 billion.

Since the decision had a negative effect on financial health of the company, SSGC challenged it in the Supreme Court.

Earlier, the Economic Coordination Committee (ECC), in its meeting in November 2014, had approved a proposal that said the issue of income from non-core activities may be dealt with at the time of finalising the new tariff regime.



The non-core activities included the late payment surcharge, the meter manufacturing plant, royalty from Jamshoro Joint Venture Limited and sales of condensate and liquefied petroleum gas (LPG).

However, according to officials of the Petroleum Division, after more than three years, there appears to be no definite timeline as to when the new tariff regime will be introduced and implemented.

Ogra has conveyed to the Petroleum Division that it has initiated public consultation in respect of the tariff revision for natural gas consumption.

Published in The Express Tribune, December 28^h, 2017.

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