OGRA under pressure to recover Rs18 billion from gas consumers

Independent study proposes higher UFG benchmark at 7.6% for past five years

Zafar Bhutta March 06, 2018
OGRA under pressure PHOTO: FILE

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) is coming under pressure to burden gas consumers with payment of around Rs18 billion to cover the cost of gas theft over the past five years and make backdated adjustments in financial accounts of Sui companies.

Talking to The Express Tribune, a senior Ogra official said the Petroleum Division was asking the regulator to enhance the unaccounted-for-gas (UFG) benchmark to 7.6% for financial years 2012-13 to 2016-17 in line with a study conducted by a consultant hired by the regulator.

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The Petroleum Division argued that the objective of the study was not only to determine a realistic UFG benchmark keeping in view the efficiency levels, but it was also aimed at making adjustments in accounts of previous years and setting aside the provisional UFG level. Ogra had set the UFG benchmark provisionally for financial years 2012-13 to 2016-17 since no independent expert opinion was available over that time period as per provisions of the law.

According to the official, the Petroleum Division has sent a summary to different ministries and Ogra seeking their comments before presenting it to the Economic Coordination Committee (ECC) of the cabinet for approval.

The Petroleum Division suggested that Ogra may finalise the provisional UFG benchmark and set it at 7.6% for FY13 to FY17 in line with recommendations of the study. The 7.6% level would include 5% fixed UFG benchmark whereas 2.6% depended on local conditions in order to enable gas companies to continue their operations and stave off financial collapse.

The study, which was completed in August 2017, recommended that for prior years Ogra may issue directives to do away with the provisional final revenue requirement by evaluating performance of Sui gas companies in relation to the proposed key monitoring indicators. The final revenue requirement for FY17 may also be evaluated based on the criteria. The study also suggested a fixed 5% UFG benchmark for the future and linked another 2.6% with the achievement of key monitoring indicators.

Earlier, Sui gas companies requested Ogra to finalise the provisional UFG benchmark for previous years, but the regulator argued that assessment based on key monitoring indicators of past years could not be made in the current year.

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Ogra emphasised that it would not be practicable to assess the performance of Sui gas companies based on study recommendations with retrospective effect. To counter that, the Petroleum Division said it would have adverse impact on the gas companies that would be forced to stop their operations and suspend gas supply to the consumers.

They may ask the government to provide funds from the budget and they may even seek state guarantees to acquire loans from banks, it said and estimated the financial impact for five years at Rs11.2 billion and Rs6.5 billion for Sui Southern Gas Company and Sui Northern Gas Pipelines respectively.

Published in The Express Tribune, March 6th, 2018.

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