Gas surcharge worth Rs3.8b lost due to incorrect assessments

Audit report says OGRA allowed Sui gas company a higher gas theft level.

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra) has allowed a higher gas theft and leakage ceiling to Sui Northern Gas Pipelines Limited and treated the company’s Workers Profit Participation Fund as an expense, causing losses of billions in gas surcharge to the provinces, observes the Auditor General of Pakistan in a report.

These along with presentation of incorrect figures for fixed assets of the gas company caused a loss of Rs3.8 billion on account of gas development surcharge, said the report. The auditor general, in its report for the year 2010-11, pointed out that according to the Unaccounted-for-Gas (UFG) Manual, published by the gas company, the generally accepted industry standard for UFG – gas theft and leakage – was three to six per cent, which was in line with international standards.

However, Ogra allowed seven per cent UFG while giving its decision on October 15, 2010 on a petition filed by the gas company for determining its revenue requirement for the year 2009-10, which caused a loss of Rs2.87 billion in the gas development surcharge.

The auditor general observed that the seven per cent UFG was not only the highest in the region but was also contrary to the world’s accepted benchmark as well as five per cent UFG allowed for the previous year.

In this regard, the Departmental Accounts Committee (DAC) of the Ministry of Petroleum, in a meeting held in February this year, directed the director general gas to furnish a reply but no response was received till the finalisation of the audit report.

According to the report, Ogra also allowed inclusion of Rs330 million on account of Workers Profit Participation Fund in ‘other operating expenses’ to calculate the final revenue requirement for 2009-10 for the gas company. This caused a shortfall of Rs330 million in the gas surcharge as the fund was not an expense but was required to be appropriated from the profit earned by the company.

The auditor general also observed that the figures for fixed assets of the gas company at the end of June 2010, as shown in annual audited accounts, were not correctly presented in the petition filed by the company and were determined by Ogra. The incorrect asset figures also caused a shortfall in the gas development surcharge.



Published in The Express Tribune, June 5^th, 2011.